Correlation Between Evolution Mining and GigaMedia

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

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

Diversification Opportunities for Evolution Mining and GigaMedia

-0.19

Correlation Coefficient

Evolution Mining  GigaMedia

Good diversification

The 3 months correlation between Evolution and GigaMedia is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Evolution Mining 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 Evolution Mining Limited 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 Evolution Mining i.e., Evolution Mining and GigaMedia go up and down completely randomly.

Pair Corralation between Evolution Mining and GigaMedia

Assuming the 90 days horizon Evolution Mining Limited is expected to generate 1.34 times more return on investment than GigaMedia. However, Evolution Mining is 1.34 times more volatile than GigaMedia. It trades about 0.22 of its potential returns per unit of risk. GigaMedia is currently generating about 0.02 per unit of risk. If you would invest  285.00  in Evolution Mining Limited on December 25, 2024 and sell it today you would earn a total of  108.00  from holding Evolution Mining Limited or generate 37.89% return on investment over 90 days.

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

Evolution Mining Limited  vs.  GigaMedia

Evolution Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

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 Evolution Mining and GigaMedia

The main advantage of trading using opposite Evolution Mining and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining 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 Evolution Mining Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.