Correlation Between Bloom Energy and GigaMedia

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

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

Diversification Opportunities for Bloom Energy and GigaMedia

0.34

Correlation Coefficient

Bloom Energy  GigaMedia

Weak diversification

The 3 months correlation between Bloom and GigaMedia is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Bloom Energy 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 Bloom Energy 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 Bloom Energy i.e., Bloom Energy and GigaMedia go up and down completely randomly.

Pair Corralation between Bloom Energy and GigaMedia

Assuming the 90 days horizon Bloom Energy is expected to generate 4.48 times more return on investment than GigaMedia. However, Bloom Energy is 4.48 times more volatile than GigaMedia. It trades about 0.12 of its potential returns per unit of risk. GigaMedia is currently generating about 0.13 per unit of risk. If you would invest  1,041  in Bloom Energy on October 20, 2024 and sell it today you would earn a total of  1,237  from holding Bloom Energy or generate 118.83% return on investment over 90 days.

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

Bloom Energy  vs.  GigaMedia

Bloom Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Bloom Energy reported solid returns over the last few months and may actually be approaching a breakup point.

GigaMedia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 12 (%) 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 Bloom Energy and GigaMedia

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