Correlation Between Gigabyte Technology and Elan Microelectronics
Can any of the company-specific risk be diversified away by investing in both Gigabyte Technology and Elan Microelectronics 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 Gigabyte Technology and Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gigabyte Technology Co and Elan Microelectronics Corp, you can compare the effects of market volatilities on Gigabyte Technology and Elan Microelectronics 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 Gigabyte Technology with a short position of Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gigabyte Technology and Elan Microelectronics.
Diversification Opportunities for Gigabyte Technology and Elan Microelectronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gigabyte and Elan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gigabyte Technology Co and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics and Gigabyte Technology 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 Gigabyte Technology Co are associated (or correlated) with Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Gigabyte Technology i.e., Gigabyte Technology and Elan Microelectronics go up and down completely randomly.
Pair Corralation between Gigabyte Technology and Elan Microelectronics
Assuming the 90 days trading horizon Gigabyte Technology Co is expected to generate 1.19 times more return on investment than Elan Microelectronics. However, Gigabyte Technology is 1.19 times more volatile than Elan Microelectronics Corp. It trades about 0.07 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about 0.02 per unit of risk. If you would invest 26,150 in Gigabyte Technology Co on August 31, 2024 and sell it today you would earn a total of 1,000.00 from holding Gigabyte Technology Co or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gigabyte Technology Co vs. Elan Microelectronics Corp
Performance |
| Timeline |
| Gigabyte Technology |
| Elan Microelectronics |
Gigabyte Technology and Elan Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gigabyte Technology and Elan Microelectronics
The main advantage of trading using opposite Gigabyte Technology and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gigabyte Technology position performs unexpectedly, Elan Microelectronics 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 Elan Microelectronics will offset losses from the drop in Elan Microelectronics' long position.| Gigabyte Technology vs. Micro Star International Co | Gigabyte Technology vs. Asustek Computer | Gigabyte Technology vs. Quanta Computer | Gigabyte Technology vs. Compal Electronics |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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