Correlation Between GigaMedia and TOWNSQUARE MEDIA

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

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

Diversification Opportunities for GigaMedia and TOWNSQUARE MEDIA

0.42

Correlation Coefficient

GigaMedia  TOWNSQUARE MEDIA

Very weak diversification

The 3 months correlation between GigaMedia and TOWNSQUARE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC and GigaMedia 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 GigaMedia are associated (or correlated) with TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of GigaMedia i.e., GigaMedia and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between GigaMedia and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.12 times more return on investment than TOWNSQUARE MEDIA. However, GigaMedia is 1.12 times more volatile than TOWNSQUARE MEDIA INC. It trades about 0.13 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about 0.06 per unit of risk. If you would invest  115.00  in GigaMedia on September 18, 2024 and sell it today you would earn a total of  18.00  from holding GigaMedia or generate 15.65% return on investment over 90 days.

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

GigaMedia  vs.  TOWNSQUARE MEDIA INC

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 uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TOWNSQUARE MEDIA INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TOWNSQUARE MEDIA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GigaMedia and TOWNSQUARE MEDIA

The main advantage of trading using opposite GigaMedia and TOWNSQUARE MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA will offset losses from the drop in TOWNSQUARE MEDIA's long position.

The idea behind GigaMedia and TOWNSQUARE MEDIA INC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.