Correlation Between GigaMedia and United States

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

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

Diversification Opportunities for GigaMedia and United States

0.86

Correlation Coefficient

GigaMedia  United States

Very poor diversification

The 3 months correlation between GigaMedia and United is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of GigaMedia i.e., GigaMedia and United States go up and down completely randomly.

Pair Corralation between GigaMedia and United States

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.6 times more return on investment than United States. However, GigaMedia is 1.6 times more volatile than United States Cellular. It trades about 0.32 of its potential returns per unit of risk. United States Cellular is currently generating about -0.07 per unit of risk. If you would invest  133.00  in GigaMedia on October 10, 2024 and sell it today you would earn a total of  24.00  from holding GigaMedia or generate 18.05% return on investment over 90 days.

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

GigaMedia  vs.  United States Cellular

GigaMedia

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 17 (%) 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.

United States Cellular

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaMedia and United States

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

The idea behind GigaMedia and United States Cellular 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.