Correlation Between SigmaTron International and Deswell Industries

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

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

Diversification Opportunities for SigmaTron International and Deswell Industries

0.08

Correlation Coefficient

SigmaTron International  Deswell Industries

Significant diversification

The 3 months correlation between SigmaTron and Deswell is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SigmaTron International and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and SigmaTron International 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 SigmaTron International 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 SigmaTron International i.e., SigmaTron International and Deswell Industries go up and down completely randomly.

Pair Corralation between SigmaTron International and Deswell Industries

Given the investment horizon of 90 days SigmaTron International is expected to under-perform the Deswell Industries. In addition to that, SigmaTron International is 1.97 times more volatile than Deswell Industries. It trades about -0.01 of its total potential returns per unit of risk. Deswell Industries is currently generating about 0.04 per unit of volatility. If you would invest  264.00  in Deswell Industries on August 31, 2024 and sell it today you would earn a total of  3.00  from holding Deswell Industries or generate 1.14% return on investment over 90 days.

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

SigmaTron International  vs.  Deswell Industries

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, SigmaTron International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Deswell Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deswell Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Deswell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SigmaTron International and Deswell Industries

The main advantage of trading using opposite SigmaTron International and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SigmaTron International 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 SigmaTron International 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.