Correlation Between GigaMedia and PLAYMATES TOYS
Can any of the company-specific risk be diversified away by investing in both GigaMedia and PLAYMATES TOYS 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 PLAYMATES TOYS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and PLAYMATES TOYS, you can compare the effects of market volatilities on GigaMedia and PLAYMATES TOYS 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 PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and PLAYMATES TOYS.
Diversification Opportunities for GigaMedia and PLAYMATES TOYS
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GigaMedia and PLAYMATES is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of GigaMedia i.e., GigaMedia and PLAYMATES TOYS go up and down completely randomly.
Pair Corralation between GigaMedia and PLAYMATES TOYS
Assuming the 90 days trading horizon GigaMedia is expected to generate 9.75 times less return on investment than PLAYMATES TOYS. But when comparing it to its historical volatility, GigaMedia is 3.86 times less risky than PLAYMATES TOYS. It trades about 0.03 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.38 in PLAYMATES TOYS on October 7, 2024 and sell it today you would earn a total of 5.62 from holding PLAYMATES TOYS or generate 407.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. PLAYMATES TOYS
Performance |
| Timeline |
| GigaMedia |
| PLAYMATES TOYS |
GigaMedia and PLAYMATES TOYS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and PLAYMATES TOYS
The main advantage of trading using opposite GigaMedia and PLAYMATES TOYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, PLAYMATES TOYS 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 PLAYMATES TOYS will offset losses from the drop in PLAYMATES TOYS's long position.The idea behind GigaMedia and PLAYMATES TOYS 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.| PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Apple Inc | PLAYMATES TOYS vs. Apple Inc |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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