Correlation Between GigaMedia and Packagingof America

Can any of the company-specific risk be diversified away by investing in both GigaMedia and Packagingof America 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 Packagingof America into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GigaMedia and Packaging of, you can compare the effects of market volatilities on GigaMedia and Packagingof America 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 Packagingof America. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Packagingof America.

Diversification Opportunities for GigaMedia and Packagingof America

0.77

Correlation Coefficient

GigaMedia  Packagingof America

Poor diversification

The 3 months correlation between GigaMedia and Packagingof is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Packaging of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packagingof America 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 Packagingof America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packagingof America has no effect on the direction of GigaMedia i.e., GigaMedia and Packagingof America go up and down completely randomly.

Pair Corralation between GigaMedia and Packagingof America

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.29 times more return on investment than Packagingof America. However, GigaMedia is 1.29 times more volatile than Packaging of. It trades about 0.19 of its potential returns per unit of risk. Packaging of is currently generating about 0.16 per unit of risk. If you would invest  117.00  in GigaMedia on October 6, 2024 and sell it today you would earn a total of  23.00  from holding GigaMedia or generate 19.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

GigaMedia  vs.  Packaging of

GigaMedia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Packagingof America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Packagingof America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaMedia and Packagingof America

The main advantage of trading using opposite GigaMedia and Packagingof America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Packagingof America 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 Packagingof America will offset losses from the drop in Packagingof America's long position.

The idea behind GigaMedia and Packaging of 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.