Correlation Between Deswell Industries and Inrad Optics

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

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

Diversification Opportunities for Deswell Industries and Inrad Optics

0.0

Correlation Coefficient

Deswell Industries  Inrad Optics

Pay attention - limited upside

The 3 months correlation between Deswell and Inrad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Inrad Optics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrad Optics 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 Inrad Optics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrad Optics has no effect on the direction of Deswell Industries i.e., Deswell Industries and Inrad Optics go up and down completely randomly.

Pair Corralation between Deswell Industries and Inrad Optics

If you would invest (100.00) in Inrad Optics on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Inrad Optics or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Deswell Industries  vs.  Inrad Optics

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 quite persistent basic indicators, Deswell Industries is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Inrad Optics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Deswell Industries and Inrad Optics

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

The idea behind Deswell Industries and Inrad Optics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.