Correlation Between ORMAT TECHNOLOGIES and GigaMedia

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

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

Diversification Opportunities for ORMAT TECHNOLOGIES and GigaMedia

0.67

Correlation Coefficient

ORMAT TECHNOLOGIES  GigaMedia

Poor diversification

The 3 months correlation between ORMAT and GigaMedia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and GigaMedia go up and down completely randomly.

Pair Corralation between ORMAT TECHNOLOGIES and GigaMedia

Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, ORMAT TECHNOLOGIES is 1.09 times less risky than GigaMedia. The stock trades about -0.03 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  116.00  in GigaMedia on September 21, 2024 and sell it today you would earn a total of  18.00  from holding GigaMedia or generate 15.52% return on investment over 90 days.

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

ORMAT TECHNOLOGIES  vs.  GigaMedia

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORMAT TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ORMAT TECHNOLOGIES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with ORMAT TECHNOLOGIES and GigaMedia

The main advantage of trading using opposite ORMAT TECHNOLOGIES and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.