Correlation Between Deswell Industries and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Deswell Industries and Methode 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 Methode 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 Methode Electronics, you can compare the effects of market volatilities on Deswell Industries and Methode 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and Methode Electronics.
Diversification Opportunities for Deswell Industries and Methode Electronics
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Deswell and Methode is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of Deswell Industries i.e., Deswell Industries and Methode Electronics go up and down completely randomly.
Pair Corralation between Deswell Industries and Methode Electronics
Given the investment horizon of 90 days Deswell Industries is expected to generate 0.33 times more return on investment than Methode Electronics. However, Deswell Industries is 3.02 times less risky than Methode Electronics. It trades about 0.08 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.02 per unit of risk. If you would invest 256.00 in Deswell Industries on August 24, 2024 and sell it today you would earn a total of 6.00 from holding Deswell Industries or generate 2.34% 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. Methode Electronics
Performance |
| Timeline |
| Deswell Industries |
| Methode Electronics |
Deswell Industries and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deswell Industries and Methode Electronics
The main advantage of trading using opposite Deswell Industries and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, Methode 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| Deswell Industries vs. Ieh Corp | Deswell Industries vs. LGL Group | Deswell Industries vs. Micropac Industries | Deswell Industries vs. SigmaTron International |
| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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