Correlation Between GigaMedia and WOLTERS KLUWER

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

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

Diversification Opportunities for GigaMedia and WOLTERS KLUWER

0.34

Correlation Coefficient

GigaMedia  WOLTERS KLUWER

Weak diversification

The 3 months correlation between GigaMedia and WOLTERS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and WOLTERS KLUWER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOLTERS KLUWER ADR 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 WOLTERS KLUWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOLTERS KLUWER ADR has no effect on the direction of GigaMedia i.e., GigaMedia and WOLTERS KLUWER go up and down completely randomly.

Pair Corralation between GigaMedia and WOLTERS KLUWER

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.96 times less return on investment than WOLTERS KLUWER. But when comparing it to its historical volatility, GigaMedia is 1.11 times less risky than WOLTERS KLUWER. It trades about 0.04 of its potential returns per unit of risk. WOLTERS KLUWER ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,510  in WOLTERS KLUWER ADR on October 11, 2024 and sell it today you would earn a total of  6,390  from holding WOLTERS KLUWER ADR or generate 67.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

GigaMedia  vs.  WOLTERS KLUWER ADR

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.

WOLTERS KLUWER ADR

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with GigaMedia and WOLTERS KLUWER

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

The idea behind GigaMedia and WOLTERS KLUWER ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.