Correlation Between Consolidated Communications and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and GigaMedia, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and GigaMedia.
Diversification Opportunities for Consolidated Communications and GigaMedia
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consolidated and GigaMedia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and GigaMedia go up and down completely randomly.
Pair Corralation between Consolidated Communications and GigaMedia
Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.68 times more return on investment than GigaMedia. However, Consolidated Communications Holdings is 1.48 times less risky than GigaMedia. It trades about 0.2 of its potential returns per unit of risk. GigaMedia is currently generating about -0.11 per unit of risk. If you would invest 436.00 in Consolidated Communications Holdings on September 21, 2024 and sell it today you would earn a total of 8.00 from holding Consolidated Communications Holdings or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Communications Ho vs. GigaMedia
Performance |
| Timeline |
| Consolidated Communications |
| GigaMedia |
Consolidated Communications and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Communications and GigaMedia
The main advantage of trading using opposite Consolidated Communications and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications Holdings 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.
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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