Correlation Between HK Electric and GigaMedia
Can any of the company-specific risk be diversified away by investing in both HK Electric 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 HK Electric and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and GigaMedia, you can compare the effects of market volatilities on HK Electric 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 HK Electric with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and GigaMedia.
Diversification Opportunities for HK Electric and GigaMedia
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and GigaMedia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and HK Electric 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 HK Electric Investments 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 HK Electric i.e., HK Electric and GigaMedia go up and down completely randomly.
Pair Corralation between HK Electric and GigaMedia
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.35 times more return on investment than GigaMedia. However, HK Electric is 1.35 times more volatile than GigaMedia. It trades about 0.0 of its potential returns per unit of risk. GigaMedia is currently generating about -0.05 per unit of risk. If you would invest 63.00 in HK Electric Investments on September 14, 2024 and sell it today you would earn a total of 0.00 from holding HK Electric Investments or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. GigaMedia
Performance |
| Timeline |
| HK Electric Investments |
| GigaMedia |
HK Electric and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and GigaMedia
The main advantage of trading using opposite HK Electric and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric 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.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| GigaMedia vs. AOYAMA TRADING | GigaMedia vs. REGAL ASIAN INVESTMENTS | GigaMedia vs. AM EAGLE OUTFITTERS | GigaMedia vs. HK Electric Investments |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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