Correlation Between GigaMedia and Virtus Investment

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

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

Diversification Opportunities for GigaMedia and Virtus Investment

0.16

Correlation Coefficient

GigaMedia  Virtus Investment

Average diversification

The 3 months correlation between GigaMedia and Virtus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Virtus Investment Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment 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 Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of GigaMedia i.e., GigaMedia and Virtus Investment go up and down completely randomly.

Pair Corralation between GigaMedia and Virtus Investment

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.0 times more return on investment than Virtus Investment. However, GigaMedia is 1.0 times less risky than Virtus Investment. It trades about 0.16 of its potential returns per unit of risk. Virtus Investment Partners is currently generating about 0.05 per unit of risk. If you would invest  120.00  in GigaMedia on October 24, 2024 and sell it today you would earn a total of  26.00  from holding GigaMedia or generate 21.67% return on investment over 90 days.

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

GigaMedia  vs.  Virtus Investment Partners

GigaMedia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Virtus Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Virtus Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GigaMedia and Virtus Investment

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

The idea behind GigaMedia and Virtus Investment Partners 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.