Correlation Between GigaMedia and WPP PLC
Can any of the company-specific risk be diversified away by investing in both GigaMedia and WPP PLC 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 GigaMedia and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and WPP PLC, you can compare the effects of market volatilities on GigaMedia and WPP PLC 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 GigaMedia with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and WPP PLC.
Diversification Opportunities for GigaMedia and WPP PLC
Very poor diversification
The 3 months correlation between GigaMedia and WPP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and GigaMedia 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 GigaMedia are associated (or correlated) with WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC has no effect on the direction of GigaMedia i.e., GigaMedia and WPP PLC go up and down completely randomly.
Pair Corralation between GigaMedia and WPP PLC
Assuming the 90 days trading horizon GigaMedia is expected to generate 0.99 times more return on investment than WPP PLC. However, GigaMedia is 1.02 times less risky than WPP PLC. It trades about 0.19 of its potential returns per unit of risk. WPP PLC is currently generating about 0.18 per unit of risk. If you would invest 124.00 in GigaMedia on September 5, 2024 and sell it today you would earn a total of 9.00 from holding GigaMedia or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
GigaMedia vs. WPP PLC
Performance |
| Timeline |
| GigaMedia |
| WPP PLC |
GigaMedia and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and WPP PLC
The main advantage of trading using opposite GigaMedia and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC's long position.| GigaMedia vs. VARIOUS EATERIES LS | GigaMedia vs. ETFS Coffee ETC | GigaMedia vs. North American Construction | GigaMedia vs. KINGBOARD CHEMICAL |
| WPP PLC vs. ANGLER GAMING PLC | WPP PLC vs. GigaMedia | WPP PLC vs. Japan Medical Dynamic | WPP PLC vs. SCANDMEDICAL SOLDK 040 |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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