Correlation Between GigaMedia and Nufarm

Can any of the company-specific risk be diversified away by investing in both GigaMedia and Nufarm at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GigaMedia and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GigaMedia and Nufarm Limited, you can compare the effects of market volatilities on GigaMedia and Nufarm and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GigaMedia with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Nufarm.

Diversification Opportunities for GigaMedia and Nufarm

-0.31

Correlation Coefficient

GigaMedia  Nufarm

Very good diversification

The 3 months correlation between GigaMedia and Nufarm is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and GigaMedia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GigaMedia are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of GigaMedia i.e., GigaMedia and Nufarm go up and down completely randomly.

Pair Corralation between GigaMedia and Nufarm

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.1 times less return on investment than Nufarm. In addition to that, GigaMedia is 1.21 times more volatile than Nufarm Limited. It trades about 0.08 of its total potential returns per unit of risk. Nufarm Limited is currently generating about 0.1 per unit of volatility. If you would invest  208.00  in Nufarm Limited on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Nufarm Limited or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GigaMedia  vs.  Nufarm Limited

GigaMedia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GigaMedia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nufarm Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nufarm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GigaMedia and Nufarm

The main advantage of trading using opposite GigaMedia and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Nufarm can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nufarm will offset losses from the drop in Nufarm's long position.

The idea behind GigaMedia and Nufarm Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.