Correlation Between GigaMedia and ENN Energy
Can any of the company-specific risk be diversified away by investing in both GigaMedia and ENN Energy 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 ENN Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and ENN Energy Holdings, you can compare the effects of market volatilities on GigaMedia and ENN Energy 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 ENN Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and ENN Energy.
Diversification Opportunities for GigaMedia and ENN Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GigaMedia and ENN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings 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 ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of GigaMedia i.e., GigaMedia and ENN Energy go up and down completely randomly.
Pair Corralation between GigaMedia and ENN Energy
Assuming the 90 days trading horizon GigaMedia is expected to under-perform the ENN Energy. But the stock apears to be less risky and, when comparing its historical volatility, GigaMedia is 7.98 times less risky than ENN Energy. The stock trades about -0.11 of its potential returns per unit of risk. The ENN Energy Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 645.00 in ENN Energy Holdings on September 12, 2024 and sell it today you would earn a total of 30.00 from holding ENN Energy Holdings or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GigaMedia vs. ENN Energy Holdings
Performance |
| Timeline |
| GigaMedia |
| ENN Energy Holdings |
GigaMedia and ENN Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and ENN Energy
The main advantage of trading using opposite GigaMedia and ENN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, ENN Energy 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 ENN Energy will offset losses from the drop in ENN Energy's long position.The idea behind GigaMedia and ENN Energy Holdings 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.| ENN Energy vs. MIRAMAR HOTEL INV | ENN Energy vs. INTERCONT HOTELS | ENN Energy vs. International Game Technology | ENN Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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