Correlation Between GigaMedia and Waste Management

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

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

Diversification Opportunities for GigaMedia and Waste Management

0.54

Correlation Coefficient

GigaMedia  Waste Management

Very weak diversification

The 3 months correlation between GigaMedia and Waste is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of GigaMedia i.e., GigaMedia and Waste Management go up and down completely randomly.

Pair Corralation between GigaMedia and Waste Management

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.47 times less return on investment than Waste Management. In addition to that, GigaMedia is 1.35 times more volatile than Waste Management. It trades about 0.04 of its total potential returns per unit of risk. Waste Management is currently generating about 0.08 per unit of volatility. If you would invest  13,444  in Waste Management on October 11, 2024 and sell it today you would earn a total of  6,796  from holding Waste Management or generate 50.55% return on investment over 90 days.

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

GigaMedia  vs.  Waste Management

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.

Waste Management

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GigaMedia and Waste Management

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

The idea behind GigaMedia and Waste Management 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.