Correlation Between GigaMedia and Ubisoft Entertainment

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

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

Diversification Opportunities for GigaMedia and Ubisoft Entertainment

0.1

Correlation Coefficient

GigaMedia  Ubisoft Entertainment

Average diversification

The 3 months correlation between GigaMedia and Ubisoft is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Ubisoft Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of GigaMedia i.e., GigaMedia and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between GigaMedia and Ubisoft Entertainment

Assuming the 90 days trading horizon GigaMedia is expected to generate 2.04 times less return on investment than Ubisoft Entertainment. But when comparing it to its historical volatility, GigaMedia is 2.76 times less risky than Ubisoft Entertainment. It trades about 0.22 of its potential returns per unit of risk. Ubisoft Entertainment SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,167  in Ubisoft Entertainment SA on October 5, 2024 and sell it today you would earn a total of  118.00  from holding Ubisoft Entertainment SA or generate 10.11% return on investment over 90 days.

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

GigaMedia  vs.  Ubisoft Entertainment SA

GigaMedia

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days GigaMedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ubisoft Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubisoft Entertainment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ubisoft Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GigaMedia and Ubisoft Entertainment

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

The idea behind GigaMedia and Ubisoft Entertainment SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.