Correlation Between GigaMedia and Jiangsu Expressway
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Jiangsu Expressway 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 Jiangsu Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Jiangsu Expressway, you can compare the effects of market volatilities on GigaMedia and Jiangsu Expressway 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 Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Jiangsu Expressway.
Diversification Opportunities for GigaMedia and Jiangsu Expressway
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GigaMedia and Jiangsu is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Jiangsu Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of GigaMedia i.e., GigaMedia and Jiangsu Expressway go up and down completely randomly.
Pair Corralation between GigaMedia and Jiangsu Expressway
Assuming the 90 days trading horizon GigaMedia is expected to generate 9.93 times less return on investment than Jiangsu Expressway. But when comparing it to its historical volatility, GigaMedia is 5.02 times less risky than Jiangsu Expressway. It trades about 0.04 of its potential returns per unit of risk. Jiangsu Expressway is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Jiangsu Expressway on September 12, 2024 and sell it today you would earn a total of 77.00 from holding Jiangsu Expressway or generate 513.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Jiangsu Expressway
Performance |
| Timeline |
| GigaMedia |
| Jiangsu Expressway |
GigaMedia and Jiangsu Expressway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Jiangsu Expressway
The main advantage of trading using opposite GigaMedia and Jiangsu Expressway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Jiangsu Expressway 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 Jiangsu Expressway will offset losses from the drop in Jiangsu Expressway's long position.The idea behind GigaMedia and Jiangsu Expressway 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.| Jiangsu Expressway vs. GigaMedia | Jiangsu Expressway vs. NH HOTEL GROUP | Jiangsu Expressway vs. Park Hotels Resorts | Jiangsu Expressway vs. Playa Hotels Resorts |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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