Correlation Between Deswell Industries and Dow Jones

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Deswell Industries and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deswell Industries and Dow Jones Industrial, you can compare the effects of market volatilities on Deswell Industries and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and Dow Jones.

Diversification Opportunities for Deswell Industries and Dow Jones

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Deswell and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Deswell Industries i.e., Deswell Industries and Dow Jones go up and down completely randomly.
    Optimize

Pair Corralation between Deswell Industries and Dow Jones

Given the investment horizon of 90 days Deswell Industries is expected to generate 1.15 times less return on investment than Dow Jones. In addition to that, Deswell Industries is 1.56 times more volatile than Dow Jones Industrial. It trades about 0.15 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of volatility. If you would invest  4,238,757  in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of  234,900  from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Deswell Industries  vs.  Dow Jones Industrial

 Performance 
       Timeline  

Deswell Industries and Dow Jones Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deswell Industries and Dow Jones

The main advantage of trading using opposite Deswell Industries and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.
The idea behind Deswell Industries and Dow Jones Industrial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

Other Complementary Tools

Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Insider Screener
Find insiders across different sectors to evaluate their impact on performance