Correlation Between GigaMedia and SHIN ETSU
Can any of the company-specific risk be diversified away by investing in both GigaMedia and SHIN ETSU 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 SHIN ETSU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and SHIN ETSU CHEMICAL , you can compare the effects of market volatilities on GigaMedia and SHIN ETSU 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 SHIN ETSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and SHIN ETSU.
Diversification Opportunities for GigaMedia and SHIN ETSU
Excellent diversification
The 3 months correlation between GigaMedia and SHIN is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN ETSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of GigaMedia i.e., GigaMedia and SHIN ETSU go up and down completely randomly.
Pair Corralation between GigaMedia and SHIN ETSU
Assuming the 90 days trading horizon GigaMedia is expected to generate 1.8 times less return on investment than SHIN ETSU. But when comparing it to its historical volatility, GigaMedia is 1.32 times less risky than SHIN ETSU. It trades about 0.03 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,940 in SHIN ETSU CHEMICAL on September 4, 2024 and sell it today you would earn a total of 546.00 from holding SHIN ETSU CHEMICAL or generate 18.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. SHIN ETSU CHEMICAL
Performance |
| Timeline |
| GigaMedia |
| SHIN ETSU CHEMICAL |
GigaMedia and SHIN ETSU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and SHIN ETSU
The main advantage of trading using opposite GigaMedia and SHIN ETSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, SHIN ETSU 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 SHIN ETSU will offset losses from the drop in SHIN ETSU's long position.The idea behind GigaMedia and SHIN ETSU CHEMICAL 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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