Correlation Between Alphabet and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Alphabet and GigaMedia 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 Alphabet and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and GigaMedia, you can compare the effects of market volatilities on Alphabet and GigaMedia 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 Alphabet with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and GigaMedia.
Diversification Opportunities for Alphabet and GigaMedia
Very poor diversification
The 3 months correlation between Alphabet and GigaMedia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of Alphabet i.e., Alphabet and GigaMedia go up and down completely randomly.
Pair Corralation between Alphabet and GigaMedia
Given the investment horizon of 90 days Alphabet is expected to generate 5.2 times less return on investment than GigaMedia. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.14 times less risky than GigaMedia. It trades about 0.04 of its potential returns per unit of risk. GigaMedia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 122.00 in GigaMedia on August 29, 2024 and sell it today you would earn a total of 11.00 from holding GigaMedia or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. GigaMedia
Performance |
| Timeline |
| Alphabet Class C |
| GigaMedia |
Alphabet and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and GigaMedia
The main advantage of trading using opposite Alphabet and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, GigaMedia 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 GigaMedia will offset losses from the drop in GigaMedia's long position.The idea behind Alphabet Inc Class C and GigaMedia 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.| GigaMedia vs. GAMING FAC SA | GigaMedia vs. Digilife Technologies Limited | GigaMedia vs. CENTURIA OFFICE REIT | GigaMedia vs. OFFICE DEPOT |
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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