Correlation Between TTM Technologies and Deswell Industries

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

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

Diversification Opportunities for TTM Technologies and Deswell Industries

0.49

Correlation Coefficient

TTM Technologies  Deswell Industries

Very weak diversification

The 3 months correlation between TTM and Deswell is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding TTM Technologies and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and TTM Technologies 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 TTM Technologies are associated (or correlated) with Deswell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deswell Industries has no effect on the direction of TTM Technologies i.e., TTM Technologies and Deswell Industries go up and down completely randomly.

Pair Corralation between TTM Technologies and Deswell Industries

Given the investment horizon of 90 days TTM Technologies is expected to generate 1.39 times more return on investment than Deswell Industries. However, TTM Technologies is 1.39 times more volatile than Deswell Industries. It trades about 0.17 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.08 per unit of risk. If you would invest  2,260  in TTM Technologies on September 5, 2024 and sell it today you would earn a total of  203.00  from holding TTM Technologies or generate 8.98% return on investment over 90 days.

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

TTM Technologies  vs.  Deswell Industries

TTM Technologies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TTM Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating primary indicators, TTM Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Deswell Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deswell Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Deswell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TTM Technologies and Deswell Industries

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

The idea behind TTM Technologies and Deswell Industries 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.