Correlation Between HP and Deswell Industries
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Deswell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Deswell Industries, you can compare the effects of market volatilities on HP 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 HP with a short position of Deswell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Deswell Industries.
Diversification Opportunities for HP and Deswell Industries
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Deswell is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and HP 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 HP Inc 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 HP i.e., HP and Deswell Industries go up and down completely randomly.
Pair Corralation between HP and Deswell Industries
Considering the 90-day investment horizon HP Inc is expected to generate 0.92 times more return on investment than Deswell Industries. However, HP Inc is 1.09 times less risky than Deswell Industries. It trades about 0.13 of its potential returns per unit of risk. Deswell Industries is currently generating about -0.06 per unit of risk. If you would invest 3,623 in HP Inc on August 23, 2024 and sell it today you would earn a total of 168.00 from holding HP Inc or generate 4.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Deswell Industries
Performance |
| Timeline |
| HP Inc |
| Deswell Industries |
HP and Deswell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Deswell Industries
The main advantage of trading using opposite HP and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.| Deswell Industries vs. Ieh Corp | Deswell Industries vs. LGL Group | Deswell Industries vs. Micropac Industries | Deswell Industries vs. SigmaTron International |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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