Correlation Between CVS Group and GigaMedia
Can any of the company-specific risk be diversified away by investing in both CVS Group 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 CVS Group and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Group plc and GigaMedia, you can compare the effects of market volatilities on CVS Group 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 CVS Group with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Group and GigaMedia.
Diversification Opportunities for CVS Group and GigaMedia
Pay attention - limited upside
The 3 months correlation between CVS and GigaMedia is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding CVS Group plc and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and CVS Group 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 CVS Group plc 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 CVS Group i.e., CVS Group and GigaMedia go up and down completely randomly.
Pair Corralation between CVS Group and GigaMedia
Assuming the 90 days horizon CVS Group plc is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, CVS Group plc is 1.35 times less risky than GigaMedia. The stock trades about -0.05 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 134.00 in GigaMedia on October 21, 2024 and sell it today you would earn a total of 14.00 from holding GigaMedia or generate 10.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Group plc vs. GigaMedia
Performance |
| Timeline |
| CVS Group plc |
| GigaMedia |
CVS Group and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Group and GigaMedia
The main advantage of trading using opposite CVS Group and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Group 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 CVS Group plc 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. Spirent Communications plc | GigaMedia vs. Ribbon Communications | GigaMedia vs. COMBA TELECOM SYST | GigaMedia vs. Chengdu PUTIAN Telecommunications |
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 Correlations module to find global opportunities by holding instruments from different markets.
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