Correlation Between Deswell Industries and Ieh Corp

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

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

Diversification Opportunities for Deswell Industries and Ieh Corp

0.03

Correlation Coefficient

Deswell Industries  Ieh Corp

Significant diversification

The 3 months correlation between Deswell and Ieh is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Ieh Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ieh Corp and Deswell Industries 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 Deswell Industries are associated (or correlated) with Ieh Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ieh Corp has no effect on the direction of Deswell Industries i.e., Deswell Industries and Ieh Corp go up and down completely randomly.

Pair Corralation between Deswell Industries and Ieh Corp

Given the investment horizon of 90 days Deswell Industries is expected to generate 1.09 times less return on investment than Ieh Corp. But when comparing it to its historical volatility, Deswell Industries is 2.78 times less risky than Ieh Corp. It trades about 0.11 of its potential returns per unit of risk. Ieh Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  938.00  in Ieh Corp on September 4, 2024 and sell it today you would earn a total of  62.00  from holding Ieh Corp or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Deswell Industries  vs.  Ieh Corp

Deswell Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deswell Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Deswell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ieh Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ieh Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical indicators, Ieh Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deswell Industries and Ieh Corp

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

The idea behind Deswell Industries and Ieh Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.