Correlation Between GigaMedia and Royal Bank
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Royal Bank 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 Royal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Royal Bank of, you can compare the effects of market volatilities on GigaMedia and Royal Bank 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 Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Royal Bank.
Diversification Opportunities for GigaMedia and Royal Bank
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GigaMedia and Royal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of GigaMedia i.e., GigaMedia and Royal Bank go up and down completely randomly.
Pair Corralation between GigaMedia and Royal Bank
Assuming the 90 days trading horizon GigaMedia is expected to generate 5.43 times less return on investment than Royal Bank. In addition to that, GigaMedia is 1.11 times more volatile than Royal Bank of. It trades about 0.02 of its total potential returns per unit of risk. Royal Bank of is currently generating about 0.11 per unit of volatility. If you would invest 7,614 in Royal Bank of on September 12, 2024 and sell it today you would earn a total of 4,212 from holding Royal Bank of or generate 55.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. Royal Bank of
Performance |
| Timeline |
| GigaMedia |
| Royal Bank |
GigaMedia and Royal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Royal Bank
The main advantage of trading using opposite GigaMedia and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Royal Bank 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 Royal Bank will offset losses from the drop in Royal Bank's long position.The idea behind GigaMedia and Royal Bank of 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.| Royal Bank vs. Scientific Games | Royal Bank vs. EAST SIDE GAMES | Royal Bank vs. Sunny Optical Technology | Royal Bank vs. GigaMedia |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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