Correlation Between GigaMedia and ConocoPhillips

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

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

Diversification Opportunities for GigaMedia and ConocoPhillips

0.56

Correlation Coefficient

GigaMedia  ConocoPhillips

Very weak diversification

The 3 months correlation between GigaMedia and ConocoPhillips is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of GigaMedia i.e., GigaMedia and ConocoPhillips go up and down completely randomly.

Pair Corralation between GigaMedia and ConocoPhillips

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.42 times more return on investment than ConocoPhillips. However, GigaMedia is 2.39 times less risky than ConocoPhillips. It trades about -0.11 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.44 per unit of risk. If you would invest  135.00  in GigaMedia on September 20, 2024 and sell it today you would lose (2.00) from holding GigaMedia or give up 1.48% of portfolio value over 90 days.

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

GigaMedia  vs.  ConocoPhillips

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 uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ConocoPhillips 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 ConocoPhillips

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

The idea behind GigaMedia and ConocoPhillips 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 Transaction History module to view history of all your transactions and understand their impact on performance.