Correlation Between Deswell Industries and Sanmina

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

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

Diversification Opportunities for Deswell Industries and Sanmina

-0.51

Correlation Coefficient

Deswell Industries  Sanmina

Excellent diversification

The 3 months correlation between Deswell and Sanmina is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Sanmina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanmina 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 Sanmina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanmina has no effect on the direction of Deswell Industries i.e., Deswell Industries and Sanmina go up and down completely randomly.

Pair Corralation between Deswell Industries and Sanmina

Given the investment horizon of 90 days Deswell Industries is expected to under-perform the Sanmina. But the stock apears to be less risky and, when comparing its historical volatility, Deswell Industries is 1.17 times less risky than Sanmina. The stock trades about -0.11 of its potential returns per unit of risk. The Sanmina is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,002  in Sanmina on December 1, 2024 and sell it today you would earn a total of  190.00  from holding Sanmina or generate 2.37% return on investment over 90 days.

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

Deswell Industries  vs.  Sanmina

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.

Sanmina

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanmina are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sanmina is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Deswell Industries and Sanmina

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

The idea behind Deswell Industries and Sanmina 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.