Correlation Between GigaMedia and OVERSEA CHINUNSPADR2

Can any of the company-specific risk be diversified away by investing in both GigaMedia and OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GigaMedia and OVERSEA CHINUNSPADR2, you can compare the effects of market volatilities on GigaMedia and OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and OVERSEA CHINUNSPADR2.

Diversification Opportunities for GigaMedia and OVERSEA CHINUNSPADR2

0.83

Correlation Coefficient

GigaMedia  OVERSEA CHINUNSPADR2

Very poor diversification

The 3 months correlation between GigaMedia and OVERSEA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and OVERSEA CHINUNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OVERSEA CHINUNSPADR2 has no effect on the direction of GigaMedia i.e., GigaMedia and OVERSEA CHINUNSPADR2 go up and down completely randomly.

Pair Corralation between GigaMedia and OVERSEA CHINUNSPADR2

Assuming the 90 days trading horizon GigaMedia is expected to under-perform the OVERSEA CHINUNSPADR2. But the stock apears to be less risky and, when comparing its historical volatility, GigaMedia is 1.25 times less risky than OVERSEA CHINUNSPADR2. The stock trades about -0.11 of its potential returns per unit of risk. The OVERSEA CHINUNSPADR2 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,300  in OVERSEA CHINUNSPADR2 on September 22, 2024 and sell it today you would earn a total of  40.00  from holding OVERSEA CHINUNSPADR2 or generate 1.74% return on investment over 90 days.

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

GigaMedia  vs.  OVERSEA CHINUNSPADR2

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.

OVERSEA CHINUNSPADR2

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OVERSEA CHINUNSPADR2 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, OVERSEA CHINUNSPADR2 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GigaMedia and OVERSEA CHINUNSPADR2

The main advantage of trading using opposite GigaMedia and OVERSEA CHINUNSPADR2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 will offset losses from the drop in OVERSEA CHINUNSPADR2's long position.

The idea behind GigaMedia and OVERSEA CHINUNSPADR2 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.