Correlation Between United Rentals and GigaMedia

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

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

Diversification Opportunities for United Rentals and GigaMedia

-0.46

Correlation Coefficient

United Rentals  GigaMedia

Very good diversification

The 3 months correlation between United and GigaMedia is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and GigaMedia go up and down completely randomly.

Pair Corralation between United Rentals and GigaMedia

Assuming the 90 days horizon United Rentals is expected to generate 12.12 times less return on investment than GigaMedia. In addition to that, United Rentals is 1.19 times more volatile than GigaMedia. It trades about 0.01 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.14 per unit of volatility. If you would invest  122.00  in GigaMedia on October 26, 2024 and sell it today you would earn a total of  24.00  from holding GigaMedia or generate 19.67% return on investment over 90 days.

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

United Rentals  vs.  GigaMedia

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GigaMedia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 11 (%) 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 United Rentals and GigaMedia

The main advantage of trading using opposite United Rentals and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals 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 United Rentals 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.