Correlation Between Deswell Industries and China Natural
Can any of the company-specific risk be diversified away by investing in both Deswell Industries and China Natural 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 China Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deswell Industries and China Natural Resources, you can compare the effects of market volatilities on Deswell Industries and China Natural 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 China Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and China Natural.
Diversification Opportunities for Deswell Industries and China Natural
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Deswell and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources 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 China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of Deswell Industries i.e., Deswell Industries and China Natural go up and down completely randomly.
Pair Corralation between Deswell Industries and China Natural
Given the investment horizon of 90 days Deswell Industries is expected to generate 6.67 times less return on investment than China Natural. But when comparing it to its historical volatility, Deswell Industries is 5.8 times less risky than China Natural. It trades about 0.01 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 340.00 in China Natural Resources on August 27, 2024 and sell it today you would lose (277.00) from holding China Natural Resources or give up 81.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deswell Industries vs. China Natural Resources
Performance |
| Timeline |
| Deswell Industries |
| China Natural Resources |
Deswell Industries and China Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deswell Industries and China Natural
The main advantage of trading using opposite Deswell Industries and China Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, China Natural 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 China Natural will offset losses from the drop in China Natural's long position.| Deswell Industries vs. Ieh Corp | Deswell Industries vs. LGL Group | Deswell Industries vs. Micropac Industries | Deswell Industries vs. SigmaTron International |
| China Natural vs. Seychelle Environmtl | China Natural vs. Vow ASA | China Natural vs. Eestech | China Natural vs. Energy and Water |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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