Correlation Between Microsoft and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and GigaMedia, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and GigaMedia.
Diversification Opportunities for Microsoft and GigaMedia
Poor diversification
The 3 months correlation between Microsoft and GigaMedia is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and GigaMedia go up and down completely randomly.
Pair Corralation between Microsoft and GigaMedia
Assuming the 90 days trading horizon Microsoft is expected to generate 2.6 times less return on investment than GigaMedia. But when comparing it to its historical volatility, Microsoft is 1.24 times less risky than GigaMedia. It trades about 0.09 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. GigaMedia
Performance |
| Timeline |
| Microsoft |
| GigaMedia |
Microsoft and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and GigaMedia
The main advantage of trading using opposite Microsoft and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. VIRGIN WINES UK | Microsoft vs. Fast Retailing Co | Microsoft vs. Salesforce | Microsoft vs. Infrastrutture Wireless Italiane |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |