Correlation Between GigaMedia and AECOM TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both GigaMedia and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and AECOM TECHNOLOGY, you can compare the effects of market volatilities on GigaMedia and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and AECOM TECHNOLOGY.
Diversification Opportunities for GigaMedia and AECOM TECHNOLOGY
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GigaMedia and AECOM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of GigaMedia i.e., GigaMedia and AECOM TECHNOLOGY go up and down completely randomly.
Pair Corralation between GigaMedia and AECOM TECHNOLOGY
Assuming the 90 days trading horizon GigaMedia is expected to generate 1.33 times less return on investment than AECOM TECHNOLOGY. In addition to that, GigaMedia is 1.17 times more volatile than AECOM TECHNOLOGY. It trades about 0.13 of its total potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.2 per unit of volatility. If you would invest 8,679 in AECOM TECHNOLOGY on September 12, 2024 and sell it today you would earn a total of 1,921 from holding AECOM TECHNOLOGY or generate 22.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| GigaMedia |
| AECOM TECHNOLOGY |
GigaMedia and AECOM TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and AECOM TECHNOLOGY
The main advantage of trading using opposite GigaMedia and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY'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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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