Correlation Between Equinix and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Equinix 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 Equinix and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinix and GigaMedia, you can compare the effects of market volatilities on Equinix 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 Equinix with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinix and GigaMedia.
Diversification Opportunities for Equinix and GigaMedia
Very poor diversification
The 3 months correlation between Equinix and GigaMedia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Equinix 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 Equinix 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 Equinix i.e., Equinix and GigaMedia go up and down completely randomly.
Pair Corralation between Equinix and GigaMedia
Assuming the 90 days trading horizon Equinix is expected to generate 1.09 times more return on investment than GigaMedia. However, Equinix is 1.09 times more volatile than GigaMedia. It trades about 0.06 of its potential returns per unit of risk. GigaMedia is currently generating about 0.03 per unit of risk. If you would invest 70,254 in Equinix on September 12, 2024 and sell it today you would earn a total of 22,666 from holding Equinix or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinix vs. GigaMedia
Performance |
| Timeline |
| Equinix |
| GigaMedia |
Equinix and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinix and GigaMedia
The main advantage of trading using opposite Equinix and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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.| Equinix vs. GigaMedia | Equinix vs. TOWNSQUARE MEDIA INC | Equinix vs. Q2M Managementberatung AG | Equinix vs. LANDSEA GREEN MANAGEMENT |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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