Correlation Between GigaMedia and Major Drilling
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Major Drilling 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 Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Major Drilling Group, you can compare the effects of market volatilities on GigaMedia and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Major Drilling.
Diversification Opportunities for GigaMedia and Major Drilling
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GigaMedia and Major is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of GigaMedia i.e., GigaMedia and Major Drilling go up and down completely randomly.
Pair Corralation between GigaMedia and Major Drilling
Assuming the 90 days trading horizon GigaMedia is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, GigaMedia is 3.76 times less risky than Major Drilling. The stock trades about -0.18 of its potential returns per unit of risk. The Major Drilling Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 550.00 in Major Drilling Group on September 17, 2024 and sell it today you would earn a total of 25.00 from holding Major Drilling Group or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Major Drilling Group
Performance |
| Timeline |
| GigaMedia |
| Major Drilling Group |
GigaMedia and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Major Drilling
The main advantage of trading using opposite GigaMedia and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.The idea behind GigaMedia and Major Drilling Group 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.| Major Drilling vs. BHP Group Limited | Major Drilling vs. Vale SA | Major Drilling vs. Superior Plus Corp | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |