Correlation Between Deswell Industries and Integrated Media

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

By analyzing existing cross correlation between Deswell Industries and Integrated Media Technology, you can compare the effects of market volatilities on Deswell Industries and Integrated Media 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 Integrated Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and Integrated Media.

Diversification Opportunities for Deswell Industries and Integrated Media

0.21

Correlation Coefficient

Deswell Industries  Integrated Media

Modest diversification

The 3 months correlation between Deswell and Integrated is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Integrated Media Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Media Tec 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 Integrated Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Media Tec has no effect on the direction of Deswell Industries i.e., Deswell Industries and Integrated Media go up and down completely randomly.

Pair Corralation between Deswell Industries and Integrated Media

Given the investment horizon of 90 days Deswell Industries is expected to under-perform the Integrated Media. But the stock apears to be less risky and, when comparing its historical volatility, Deswell Industries is 2.79 times less risky than Integrated Media. The stock trades about -0.11 of its potential returns per unit of risk. The Integrated Media Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Integrated Media Technology on December 1, 2024 and sell it today you would lose (12.00) from holding Integrated Media Technology or give up 9.02% of portfolio value over 90 days.

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

Deswell Industries  vs.  Integrated Media Technology

Deswell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deswell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Integrated Media Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Integrated Media Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Integrated Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deswell Industries and Integrated Media

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

The idea behind Deswell Industries and Integrated Media Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.