Correlation Between Deswell Industries and Sonida Senior

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

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

Diversification Opportunities for Deswell Industries and Sonida Senior

-0.24

Correlation Coefficient

Deswell Industries  Sonida Senior

Very good diversification

The 3 months correlation between Deswell and Sonida is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Deswell Industries i.e., Deswell Industries and Sonida Senior go up and down completely randomly.

Pair Corralation between Deswell Industries and Sonida Senior

Given the investment horizon of 90 days Deswell Industries is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, Deswell Industries is 1.73 times less risky than Sonida Senior. The stock trades about -0.08 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,274  in Sonida Senior Living on December 29, 2024 and sell it today you would earn a total of  48.00  from holding Sonida Senior Living or generate 2.11% return on investment over 90 days.

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

Deswell Industries  vs.  Sonida Senior Living

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.

Sonida Senior Living

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deswell Industries and Sonida Senior

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

The idea behind Deswell Industries and Sonida Senior Living 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 Anywhere module to track or share privately all of your investments from the convenience of any device.