Correlation Between GigaMedia and ITALIAN WINE

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

By analyzing existing cross correlation between GigaMedia and ITALIAN WINE BRANDS, you can compare the effects of market volatilities on GigaMedia and ITALIAN WINE 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 ITALIAN WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and ITALIAN WINE.

Diversification Opportunities for GigaMedia and ITALIAN WINE

0.42

Correlation Coefficient

GigaMedia  ITALIAN WINE

Very weak diversification

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

Pair Corralation between GigaMedia and ITALIAN WINE

Assuming the 90 days trading horizon GigaMedia is expected to under-perform the ITALIAN WINE. But the stock apears to be less risky and, when comparing its historical volatility, GigaMedia is 1.6 times less risky than ITALIAN WINE. The stock trades about -0.22 of its potential returns per unit of risk. The ITALIAN WINE BRANDS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,170  in ITALIAN WINE BRANDS on September 16, 2024 and sell it today you would earn a total of  80.00  from holding ITALIAN WINE BRANDS or generate 3.69% return on investment over 90 days.

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

GigaMedia  vs.  ITALIAN WINE BRANDS

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.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GigaMedia and ITALIAN WINE

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

The idea behind GigaMedia and ITALIAN WINE BRANDS 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.