Correlation Between Deswell Industries and Immersion

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

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

Diversification Opportunities for Deswell Industries and Immersion

-0.39

Correlation Coefficient

Deswell Industries  Immersion

Very good diversification

The 3 months correlation between Deswell and Immersion is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Immersion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immersion 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 Immersion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immersion has no effect on the direction of Deswell Industries i.e., Deswell Industries and Immersion go up and down completely randomly.

Pair Corralation between Deswell Industries and Immersion

Given the investment horizon of 90 days Deswell Industries is expected to under-perform the Immersion. But the stock apears to be less risky and, when comparing its historical volatility, Deswell Industries is 1.26 times less risky than Immersion. The stock trades about -0.02 of its potential returns per unit of risk. The Immersion is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  862.00  in Immersion on September 22, 2024 and sell it today you would earn a total of  33.00  from holding Immersion or generate 3.83% 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.  Immersion

Deswell Industries

Risk-Adjusted Performance

0 of 100

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.

Immersion

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Immersion is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Deswell Industries and Immersion

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

The idea behind Deswell Industries and Immersion 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.