Correlation Between GigaMedia and Swedish Orphan

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

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

Diversification Opportunities for GigaMedia and Swedish Orphan

-0.13

Correlation Coefficient

GigaMedia  Swedish Orphan

Good diversification

The 3 months correlation between GigaMedia and Swedish is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of GigaMedia i.e., GigaMedia and Swedish Orphan go up and down completely randomly.

Pair Corralation between GigaMedia and Swedish Orphan

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.64 times more return on investment than Swedish Orphan. However, GigaMedia is 1.55 times less risky than Swedish Orphan. It trades about 0.17 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.01 per unit of risk. If you would invest  126.00  in GigaMedia on October 6, 2024 and sell it today you would earn a total of  13.00  from holding GigaMedia or generate 10.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

GigaMedia  vs.  Swedish Orphan Biovitrum

GigaMedia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 14 (%) 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.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with GigaMedia and Swedish Orphan

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

The idea behind GigaMedia and Swedish Orphan Biovitrum 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.