Correlation Between Media and GigaMedia

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

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

Diversification Opportunities for Media and GigaMedia

0.8

Correlation Coefficient

Media  GigaMedia

Very poor diversification

The 3 months correlation between Media and GigaMedia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Media 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 Media and Games 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 Media i.e., Media and GigaMedia go up and down completely randomly.

Pair Corralation between Media and GigaMedia

Assuming the 90 days trading horizon Media is expected to generate 1.72 times less return on investment than GigaMedia. In addition to that, Media is 1.84 times more volatile than GigaMedia. It trades about 0.04 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.14 per unit of volatility. If you would invest  114.00  in GigaMedia on September 3, 2024 and sell it today you would earn a total of  19.00  from holding GigaMedia or generate 16.67% return on investment over 90 days.

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

Media and Games  vs.  GigaMedia

Media and Games

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Media and GigaMedia

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

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.