Correlation Between GigaMedia and Datang International
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Datang International 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 Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Datang International Power, you can compare the effects of market volatilities on GigaMedia and Datang International 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 Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Datang International.
Diversification Opportunities for GigaMedia and Datang International
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GigaMedia and Datang is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of GigaMedia i.e., GigaMedia and Datang International go up and down completely randomly.
Pair Corralation between GigaMedia and Datang International
Assuming the 90 days trading horizon GigaMedia is expected to generate 4.03 times less return on investment than Datang International. But when comparing it to its historical volatility, GigaMedia is 2.37 times less risky than Datang International. It trades about 0.03 of its potential returns per unit of risk. Datang International Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Datang International Power on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Datang International Power or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Datang International Power
Performance |
| Timeline |
| GigaMedia |
| Datang International |
GigaMedia and Datang International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Datang International
The main advantage of trading using opposite GigaMedia and Datang International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Datang International 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 Datang International will offset losses from the drop in Datang International's long position.| GigaMedia vs. Titan Machinery | GigaMedia vs. AUST AGRICULTURAL | GigaMedia vs. North American Construction | GigaMedia vs. ALEFARM BREWING DK 05 |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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