Correlation Between Deswell Industries and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both Deswell Industries and Benchmark Electronics 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 Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deswell Industries and Benchmark Electronics, you can compare the effects of market volatilities on Deswell Industries and Benchmark Electronics 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and Benchmark Electronics.
Diversification Opportunities for Deswell Industries and Benchmark Electronics
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Deswell and Benchmark is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Deswell Industries i.e., Deswell Industries and Benchmark Electronics go up and down completely randomly.
Pair Corralation between Deswell Industries and Benchmark Electronics
Given the investment horizon of 90 days Deswell Industries is expected to generate 4.78 times less return on investment than Benchmark Electronics. But when comparing it to its historical volatility, Deswell Industries is 2.0 times less risky than Benchmark Electronics. It trades about 0.04 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,542 in Benchmark Electronics on August 31, 2024 and sell it today you would earn a total of 263.00 from holding Benchmark Electronics or generate 5.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deswell Industries vs. Benchmark Electronics
Performance |
| Timeline |
| Deswell Industries |
| Benchmark Electronics |
Deswell Industries and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deswell Industries and Benchmark Electronics
The main advantage of trading using opposite Deswell Industries and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| Deswell Industries vs. Ieh Corp | Deswell Industries vs. LGL Group | Deswell Industries vs. Micropac Industries | Deswell Industries vs. SigmaTron International |
| Benchmark Electronics vs. Sanmina | Benchmark Electronics vs. Methode Electronics | Benchmark Electronics vs. OSI Systems | Benchmark Electronics vs. Celestica |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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