Correlation Between GigaMedia and Evolution Mining

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

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

Diversification Opportunities for GigaMedia and Evolution Mining

-0.01

Correlation Coefficient

GigaMedia  Evolution Mining

Good diversification

The 3 months correlation between GigaMedia and Evolution is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of GigaMedia i.e., GigaMedia and Evolution Mining go up and down completely randomly.

Pair Corralation between GigaMedia and Evolution Mining

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.78 times more return on investment than Evolution Mining. However, GigaMedia is 1.28 times less risky than Evolution Mining. It trades about 0.23 of its potential returns per unit of risk. Evolution Mining Limited is currently generating about -0.17 per unit of risk. If you would invest  133.00  in GigaMedia on October 9, 2024 and sell it today you would earn a total of  7.00  from holding GigaMedia or generate 5.26% return on investment over 90 days.

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

GigaMedia  vs.  Evolution Mining Limited

GigaMedia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 14 (%) 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.

Evolution Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GigaMedia and Evolution Mining

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

The idea behind GigaMedia and Evolution Mining Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.