Correlation Between GigaMedia and Redcare Pharmacy

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

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

Diversification Opportunities for GigaMedia and Redcare Pharmacy

0.01

Correlation Coefficient

GigaMedia  Redcare Pharmacy

Significant diversification

The 3 months correlation between GigaMedia and Redcare is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Redcare Pharmacy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redcare Pharmacy 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 Redcare Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redcare Pharmacy has no effect on the direction of GigaMedia i.e., GigaMedia and Redcare Pharmacy go up and down completely randomly.

Pair Corralation between GigaMedia and Redcare Pharmacy

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.88 times more return on investment than Redcare Pharmacy. However, GigaMedia is 1.13 times less risky than Redcare Pharmacy. It trades about 0.23 of its potential returns per unit of risk. Redcare Pharmacy NV is currently generating about -0.1 per unit of risk. If you would invest  117.00  in GigaMedia on October 11, 2024 and sell it today you would earn a total of  40.00  from holding GigaMedia or generate 34.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

GigaMedia  vs.  Redcare Pharmacy NV

GigaMedia

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 18 (%) 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.

Redcare Pharmacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redcare Pharmacy NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GigaMedia and Redcare Pharmacy

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

The idea behind GigaMedia and Redcare Pharmacy NV 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.