Correlation Between GigaMedia and Rayonier Advanced

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

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

Diversification Opportunities for GigaMedia and Rayonier Advanced

0.76

Correlation Coefficient

GigaMedia  Rayonier Advanced

Poor diversification

The 3 months correlation between GigaMedia and Rayonier is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of GigaMedia i.e., GigaMedia and Rayonier Advanced go up and down completely randomly.

Pair Corralation between GigaMedia and Rayonier Advanced

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.3 times more return on investment than Rayonier Advanced. However, GigaMedia is 3.38 times less risky than Rayonier Advanced. It trades about -0.18 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.28 per unit of risk. If you would invest  136.00  in GigaMedia on September 17, 2024 and sell it today you would lose (3.00) from holding GigaMedia or give up 2.21% of portfolio value over 90 days.

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

GigaMedia  vs.  Rayonier Advanced Materials

GigaMedia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 11 (%) 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.

Rayonier Advanced

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rayonier Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaMedia and Rayonier Advanced

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

The idea behind GigaMedia and Rayonier Advanced Materials 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.