Correlation Between UTStarcom Holdings and Deswell Industries

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

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

Diversification Opportunities for UTStarcom Holdings and Deswell Industries

0.35

Correlation Coefficient

UTStarcom Holdings  Deswell Industries

Weak diversification

The 3 months correlation between UTStarcom and Deswell is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding UTStarcom Holdings Corp and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and UTStarcom Holdings 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 UTStarcom Holdings Corp 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 UTStarcom Holdings i.e., UTStarcom Holdings and Deswell Industries go up and down completely randomly.

Pair Corralation between UTStarcom Holdings and Deswell Industries

Given the investment horizon of 90 days UTStarcom Holdings Corp is expected to under-perform the Deswell Industries. In addition to that, UTStarcom Holdings is 2.64 times more volatile than Deswell Industries. It trades about -0.04 of its total potential returns per unit of risk. Deswell Industries is currently generating about -0.08 per unit of volatility. If you would invest  248.00  in Deswell Industries on December 30, 2024 and sell it today you would lose (16.00) from holding Deswell Industries or give up 6.45% of portfolio value over 90 days.

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

UTStarcom Holdings Corp  vs.  Deswell Industries

UTStarcom Holdings Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days UTStarcom Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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.

Pair Trading with UTStarcom Holdings and Deswell Industries

The main advantage of trading using opposite UTStarcom Holdings and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UTStarcom Holdings 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 UTStarcom Holdings Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.