Correlation Between PENN Entertainment and GigaMedia

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

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

Diversification Opportunities for PENN Entertainment and GigaMedia

-0.02

Correlation Coefficient

PENN Entertainment  GigaMedia

Good diversification

The 3 months correlation between PENN and GigaMedia is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and PENN Entertainment 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 PENN Entertainment are associated (or correlated) with GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and GigaMedia go up and down completely randomly.

Pair Corralation between PENN Entertainment and GigaMedia

Assuming the 90 days trading horizon PENN Entertainment is expected to under-perform the GigaMedia. In addition to that, PENN Entertainment is 1.55 times more volatile than GigaMedia. It trades about -0.06 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.02 per unit of volatility. If you would invest  140.00  in GigaMedia on December 24, 2024 and sell it today you would earn a total of  2.00  from holding GigaMedia or generate 1.43% return on investment over 90 days.

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

PENN Entertainment  vs.  GigaMedia

PENN Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with PENN Entertainment and GigaMedia

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

The idea behind PENN Entertainment and GigaMedia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.