Correlation Between Telecom Argentina and GigaMedia

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

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

Diversification Opportunities for Telecom Argentina and GigaMedia

0.88

Correlation Coefficient

Telecom Argentina  GigaMedia

Very poor diversification

The 3 months correlation between Telecom and GigaMedia is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina SA and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Telecom Argentina 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 Telecom Argentina SA 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 Telecom Argentina i.e., Telecom Argentina and GigaMedia go up and down completely randomly.

Pair Corralation between Telecom Argentina and GigaMedia

Assuming the 90 days horizon Telecom Argentina is expected to generate 2.79 times less return on investment than GigaMedia. In addition to that, Telecom Argentina is 1.15 times more volatile than GigaMedia. It trades about 0.1 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.32 per unit of volatility. If you would invest  133.00  in GigaMedia on October 11, 2024 and sell it today you would earn a total of  24.00  from holding GigaMedia or generate 18.05% return on investment over 90 days.

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

Telecom Argentina SA  vs.  GigaMedia

Telecom Argentina

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Telecom Argentina reported solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Telecom Argentina and GigaMedia

The main advantage of trading using opposite Telecom Argentina and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina 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 Telecom Argentina SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.