Correlation Between Sumitomo Rubber and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber 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 Sumitomo Rubber and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Rubber Industries and GigaMedia, you can compare the effects of market volatilities on Sumitomo Rubber 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 Sumitomo Rubber with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and GigaMedia.
Diversification Opportunities for Sumitomo Rubber and GigaMedia
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and GigaMedia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Sumitomo Rubber 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 Sumitomo Rubber Industries 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 Sumitomo Rubber i.e., Sumitomo Rubber and GigaMedia go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and GigaMedia
Assuming the 90 days horizon Sumitomo Rubber is expected to generate 1.37 times less return on investment than GigaMedia. But when comparing it to its historical volatility, Sumitomo Rubber Industries is 1.05 times less risky than GigaMedia. It trades about 0.13 of its potential returns per unit of risk. GigaMedia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 117.00 in GigaMedia on September 5, 2024 and sell it today you would earn a total of 16.00 from holding GigaMedia or generate 13.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. GigaMedia
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| GigaMedia |
Sumitomo Rubber and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and GigaMedia
The main advantage of trading using opposite Sumitomo Rubber and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber 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 Sumitomo Rubber Industries 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.| GigaMedia vs. VARIOUS EATERIES LS | GigaMedia vs. ETFS Coffee ETC | GigaMedia vs. North American Construction | GigaMedia vs. KINGBOARD CHEMICAL |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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