Correlation Between GigaMedia and Beijing Media
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Beijing Media 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 Beijing Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Beijing Media, you can compare the effects of market volatilities on GigaMedia and Beijing Media 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 Beijing Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Beijing Media.
Diversification Opportunities for GigaMedia and Beijing Media
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GigaMedia and Beijing is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Media 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 Beijing Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Media has no effect on the direction of GigaMedia i.e., GigaMedia and Beijing Media go up and down completely randomly.
Pair Corralation between GigaMedia and Beijing Media
Assuming the 90 days trading horizon GigaMedia is expected to generate 0.72 times more return on investment than Beijing Media. However, GigaMedia is 1.39 times less risky than Beijing Media. It trades about 0.18 of its potential returns per unit of risk. Beijing Media is currently generating about 0.02 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Beijing Media
Performance |
| Timeline |
| GigaMedia |
| Beijing Media |
GigaMedia and Beijing Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Beijing Media
The main advantage of trading using opposite GigaMedia and Beijing Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Beijing Media 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 Beijing Media will offset losses from the drop in Beijing Media's long position.The idea behind GigaMedia and Beijing Media 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.| Beijing Media vs. Superior Plus Corp | Beijing Media vs. SIVERS SEMICONDUCTORS AB | Beijing Media vs. Talanx AG | Beijing Media vs. 2G ENERGY |
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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