Correlation Between GigaMedia and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Highlight Communications 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 Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Highlight Communications AG, you can compare the effects of market volatilities on GigaMedia and Highlight Communications 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 Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Highlight Communications.
Diversification Opportunities for GigaMedia and Highlight Communications
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between GigaMedia and Highlight is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of GigaMedia i.e., GigaMedia and Highlight Communications go up and down completely randomly.
Pair Corralation between GigaMedia and Highlight Communications
Assuming the 90 days trading horizon GigaMedia is expected to generate 1.64 times less return on investment than Highlight Communications. But when comparing it to its historical volatility, GigaMedia is 1.35 times less risky than Highlight Communications. It trades about 0.18 of its potential returns per unit of risk. Highlight Communications AG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Highlight Communications AG on September 13, 2024 and sell it today you would earn a total of 22.00 from holding Highlight Communications AG or generate 23.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
GigaMedia vs. Highlight Communications AG
Performance |
| Timeline |
| GigaMedia |
| Highlight Communications |
GigaMedia and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Highlight Communications
The main advantage of trading using opposite GigaMedia and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.| GigaMedia vs. Titan Machinery | GigaMedia vs. AUST AGRICULTURAL | GigaMedia vs. North American Construction | GigaMedia vs. ALEFARM BREWING DK 05 |
| Highlight Communications vs. Solstad Offshore ASA | Highlight Communications vs. SBM OFFSHORE | Highlight Communications vs. Ares Management Corp | Highlight Communications vs. TOREX SEMICONDUCTOR LTD |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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