Correlation Between British American and GigaMedia
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and GigaMedia, you can compare the effects of market volatilities on British American 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 British American with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and GigaMedia.
Diversification Opportunities for British American and GigaMedia
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and GigaMedia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and British American 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 British American Tobacco 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 British American i.e., British American and GigaMedia go up and down completely randomly.
Pair Corralation between British American and GigaMedia
Assuming the 90 days trading horizon British American Tobacco is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, British American Tobacco is 3.65 times less risky than GigaMedia. The stock trades about -0.1 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 134.00 in GigaMedia on October 20, 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 Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
British American Tobacco vs. GigaMedia
Performance |
| Timeline |
| British American Tobacco |
| GigaMedia |
British American and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and GigaMedia
The main advantage of trading using opposite British American and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. GigaMedia | British American vs. PENN NATL GAMING | British American vs. Tencent Music Entertainment | British American vs. Urban Outfitters |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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