Correlation Between GigaMedia and XLMedia PLC
Can any of the company-specific risk be diversified away by investing in both GigaMedia and XLMedia 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 XLMedia PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and XLMedia PLC, you can compare the effects of market volatilities on GigaMedia and XLMedia 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 XLMedia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and XLMedia PLC.
Diversification Opportunities for GigaMedia and XLMedia PLC
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GigaMedia and XLMedia is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of GigaMedia i.e., GigaMedia and XLMedia PLC go up and down completely randomly.
Pair Corralation between GigaMedia and XLMedia PLC
Assuming the 90 days trading horizon GigaMedia is expected to generate 1.4 times more return on investment than XLMedia PLC. However, GigaMedia is 1.4 times more volatile than XLMedia PLC. It trades about 0.18 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.21 per unit of risk. If you would invest 122.00 in GigaMedia on August 29, 2024 and sell it today you would earn a total of 11.00 from holding GigaMedia or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. XLMedia PLC
Performance |
| Timeline |
| GigaMedia |
| XLMedia PLC |
GigaMedia and XLMedia PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and XLMedia PLC
The main advantage of trading using opposite GigaMedia and XLMedia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, XLMedia 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 XLMedia PLC will offset losses from the drop in XLMedia PLC's long position.The idea behind GigaMedia and XLMedia PLC 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.| XLMedia PLC vs. Alphabet Class A | XLMedia PLC vs. Alphabet Class A | XLMedia PLC vs. Alphabet | XLMedia PLC vs. Meta Platforms |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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