Correlation Between Siemens Energy and GigaMedia

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

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

Diversification Opportunities for Siemens Energy and GigaMedia

0.53

Correlation Coefficient

Siemens Energy  GigaMedia

Very weak diversification

The 3 months correlation between Siemens and GigaMedia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Siemens 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 Siemens Energy AG 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 Siemens Energy i.e., Siemens Energy and GigaMedia go up and down completely randomly.

Pair Corralation between Siemens Energy and GigaMedia

Assuming the 90 days trading horizon Siemens Energy AG is expected to under-perform the GigaMedia. In addition to that, Siemens Energy is 1.73 times more volatile than GigaMedia. It trades about -0.02 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.22 per unit of volatility. If you would invest  133.00  in GigaMedia on October 5, 2024 and sell it today you would earn a total of  7.00  from holding GigaMedia or generate 5.26% return on investment over 90 days.

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

Siemens Energy AG  vs.  GigaMedia

Siemens Energy AG

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Siemens Energy AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

GigaMedia

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days GigaMedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Energy and GigaMedia

The main advantage of trading using opposite Siemens Energy and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens 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 Siemens Energy AG 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.