Correlation Between Northrop Grumman and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and GigaMedia, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and GigaMedia.
Diversification Opportunities for Northrop Grumman and GigaMedia
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Northrop and GigaMedia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman i.e., Northrop Grumman and GigaMedia go up and down completely randomly.
Pair Corralation between Northrop Grumman and GigaMedia
Assuming the 90 days horizon Northrop Grumman is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, Northrop Grumman is 1.03 times less risky than GigaMedia. The stock trades about 0.0 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 124.00 in GigaMedia on August 31, 2024 and sell it today you would earn a total of 9.00 from holding GigaMedia or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northrop Grumman vs. GigaMedia
Performance |
| Timeline |
| Northrop Grumman |
| GigaMedia |
Northrop Grumman and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and GigaMedia
The main advantage of trading using opposite Northrop Grumman and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.| Northrop Grumman vs. GigaMedia | Northrop Grumman vs. Ryanair Holdings plc | Northrop Grumman vs. Sixt Leasing SE | Northrop Grumman vs. UNITED RENTALS |
| GigaMedia vs. JJ SNACK FOODS | GigaMedia vs. MOLSON RS BEVERAGE | GigaMedia vs. Astral Foods Limited | GigaMedia vs. Zijin Mining Group |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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