Correlation Between Apple and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and GigaMedia, you can compare the effects of market volatilities on Apple 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 Apple with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and GigaMedia.
Diversification Opportunities for Apple and GigaMedia
Poor diversification
The 3 months correlation between Apple and GigaMedia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Apple 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 Apple Inc 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 Apple i.e., Apple and GigaMedia go up and down completely randomly.
Pair Corralation between Apple and GigaMedia
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.98 times more return on investment than GigaMedia. However, Apple Inc is 1.02 times less risky than GigaMedia. It trades about 0.08 of its potential returns per unit of risk. GigaMedia is currently generating about 0.03 per unit of risk. If you would invest 16,409 in Apple Inc on August 25, 2024 and sell it today you would earn a total of 5,656 from holding Apple Inc or generate 34.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. GigaMedia
Performance |
| Timeline |
| Apple Inc |
| GigaMedia |
Apple and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and GigaMedia
The main advantage of trading using opposite Apple and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. REVO INSURANCE SPA | Apple vs. TreeHouse Foods | Apple vs. Astral Foods Limited | Apple vs. INDOFOOD AGRI RES |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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