Correlation Between GigaMedia and SIEMENS AG

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

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

Diversification Opportunities for GigaMedia and SIEMENS AG

0.62

Correlation Coefficient

GigaMedia  SIEMENS AG

Poor diversification

The 3 months correlation between GigaMedia and SIEMENS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and SIEMENS AG SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIEMENS AG SP 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 SIEMENS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIEMENS AG SP has no effect on the direction of GigaMedia i.e., GigaMedia and SIEMENS AG go up and down completely randomly.

Pair Corralation between GigaMedia and SIEMENS AG

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.93 times less return on investment than SIEMENS AG. In addition to that, GigaMedia is 1.4 times more volatile than SIEMENS AG SP. It trades about 0.09 of its total potential returns per unit of risk. SIEMENS AG SP is currently generating about 0.24 per unit of volatility. If you would invest  9,350  in SIEMENS AG SP on October 25, 2024 and sell it today you would earn a total of  850.00  from holding SIEMENS AG SP or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

GigaMedia  vs.  SIEMENS AG SP

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 unsteady basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

SIEMENS AG SP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, SIEMENS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaMedia and SIEMENS AG

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

The idea behind GigaMedia and SIEMENS AG SP 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..