Correlation Between GigaMedia and Weyerhaeuser

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

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

Diversification Opportunities for GigaMedia and Weyerhaeuser

-0.14

Correlation Coefficient

GigaMedia  Weyerhaeuser

Good diversification

The 3 months correlation between GigaMedia and Weyerhaeuser is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of GigaMedia i.e., GigaMedia and Weyerhaeuser go up and down completely randomly.

Pair Corralation between GigaMedia and Weyerhaeuser

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.14 times less return on investment than Weyerhaeuser. In addition to that, GigaMedia is 1.38 times more volatile than Weyerhaeuser. It trades about 0.02 of its total potential returns per unit of risk. Weyerhaeuser is currently generating about 0.03 per unit of volatility. If you would invest  2,680  in Weyerhaeuser on December 25, 2024 and sell it today you would earn a total of  60.00  from holding Weyerhaeuser or generate 2.24% return on investment over 90 days.

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

GigaMedia  vs.  Weyerhaeuser

GigaMedia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GigaMedia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Weyerhaeuser

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Weyerhaeuser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GigaMedia and Weyerhaeuser

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

The idea behind GigaMedia and Weyerhaeuser 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.