Correlation Between GigaMedia and BRIT AMER
Can any of the company-specific risk be diversified away by investing in both GigaMedia and BRIT AMER 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 BRIT AMER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and BRIT AMER TOBACCO, you can compare the effects of market volatilities on GigaMedia and BRIT AMER 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 BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and BRIT AMER.
Diversification Opportunities for GigaMedia and BRIT AMER
Very weak diversification
The 3 months correlation between GigaMedia and BRIT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of GigaMedia i.e., GigaMedia and BRIT AMER go up and down completely randomly.
Pair Corralation between GigaMedia and BRIT AMER
Assuming the 90 days trading horizon GigaMedia is expected to under-perform the BRIT AMER. But the stock apears to be less risky and, when comparing its historical volatility, GigaMedia is 2.25 times less risky than BRIT AMER. The stock trades about -0.11 of its potential returns per unit of risk. The BRIT AMER TOBACCO is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,300 in BRIT AMER TOBACCO on September 13, 2024 and sell it today you would earn a total of 281.00 from holding BRIT AMER TOBACCO or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. BRIT AMER TOBACCO
Performance |
| Timeline |
| GigaMedia |
| BRIT AMER TOBACCO |
GigaMedia and BRIT AMER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and BRIT AMER
The main advantage of trading using opposite GigaMedia and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.| GigaMedia vs. Titan Machinery | GigaMedia vs. AUST AGRICULTURAL | GigaMedia vs. North American Construction | GigaMedia vs. ALEFARM BREWING DK 05 |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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