Correlation Between GigaMedia and Eni SpA
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Eni SpA 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 Eni SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Eni SpA, you can compare the effects of market volatilities on GigaMedia and Eni SpA 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 Eni SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Eni SpA.
Diversification Opportunities for GigaMedia and Eni SpA
Good diversification
The 3 months correlation between GigaMedia and Eni is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Eni SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA 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 Eni SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA has no effect on the direction of GigaMedia i.e., GigaMedia and Eni SpA go up and down completely randomly.
Pair Corralation between GigaMedia and Eni SpA
Assuming the 90 days trading horizon GigaMedia is expected to generate 1.57 times more return on investment than Eni SpA. However, GigaMedia is 1.57 times more volatile than Eni SpA. It trades about 0.22 of its potential returns per unit of risk. Eni SpA is currently generating about -0.1 per unit of risk. If you would invest 124.00 in GigaMedia on September 4, 2024 and sell it today you would earn a total of 10.00 from holding GigaMedia or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Eni SpA
Performance |
| Timeline |
| GigaMedia |
| Eni SpA |
GigaMedia and Eni SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Eni SpA
The main advantage of trading using opposite GigaMedia and Eni SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Eni SpA 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 Eni SpA will offset losses from the drop in Eni SpA's long position.The idea behind GigaMedia and Eni SpA 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.| Eni SpA vs. Sterling Construction | Eni SpA vs. EBRO FOODS | Eni SpA vs. Dairy Farm International | Eni SpA vs. IMPERIAL TOBACCO |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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