Correlation Between WD 40 and GigaMedia

Can any of the company-specific risk be diversified away by investing in both WD 40 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 WD 40 and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 Company and GigaMedia, you can compare the effects of market volatilities on WD 40 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 WD 40 with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and GigaMedia.

Diversification Opportunities for WD 40 and GigaMedia

-0.18

Correlation Coefficient

WD 40  GigaMedia

Good diversification

The 3 months correlation between WD1 and GigaMedia is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and WD 40 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 WD 40 Company 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 WD 40 i.e., WD 40 and GigaMedia go up and down completely randomly.

Pair Corralation between WD 40 and GigaMedia

Assuming the 90 days horizon WD 40 Company is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 Company is 1.66 times less risky than GigaMedia. The stock trades about -0.15 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  140.00  in GigaMedia on October 26, 2024 and sell it today you would earn a total of  6.00  from holding GigaMedia or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

WD 40 Company  vs.  GigaMedia

WD 40 Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WD 40 Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 WD 40 and GigaMedia

The main advantage of trading using opposite WD 40 and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 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 WD 40 Company 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.