Correlation Between Titan Machinery and GigaMedia

Can any of the company-specific risk be diversified away by investing in both Titan Machinery 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 Titan Machinery and GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Titan Machinery and GigaMedia, you can compare the effects of market volatilities on Titan Machinery 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 Titan Machinery with a short position of GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and GigaMedia.

Diversification Opportunities for Titan Machinery and GigaMedia

0.79

Correlation Coefficient

Titan Machinery  GigaMedia

Poor diversification

The 3 months correlation between Titan and GigaMedia is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Titan Machinery 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 Titan Machinery 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 Titan Machinery i.e., Titan Machinery and GigaMedia go up and down completely randomly.

Pair Corralation between Titan Machinery and GigaMedia

Assuming the 90 days horizon Titan Machinery is expected to generate 1.55 times more return on investment than GigaMedia. However, Titan Machinery is 1.55 times more volatile than GigaMedia. It trades about 0.12 of its potential returns per unit of risk. GigaMedia is currently generating about 0.14 per unit of risk. If you would invest  1,190  in Titan Machinery on September 13, 2024 and sell it today you would earn a total of  260.00  from holding Titan Machinery or generate 21.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Titan Machinery  vs.  GigaMedia

Titan Machinery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Titan Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

GigaMedia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and GigaMedia

The main advantage of trading using opposite Titan Machinery and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery 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 Titan Machinery 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.