Correlation Between Viavi Solutions and Deswell Industries
Can any of the company-specific risk be diversified away by investing in both Viavi Solutions 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 Viavi Solutions and Deswell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Viavi Solutions and Deswell Industries, you can compare the effects of market volatilities on Viavi Solutions 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 Viavi Solutions with a short position of Deswell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viavi Solutions and Deswell Industries.
Diversification Opportunities for Viavi Solutions and Deswell Industries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Viavi and Deswell is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and Viavi Solutions 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 Viavi Solutions 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 Viavi Solutions i.e., Viavi Solutions and Deswell Industries go up and down completely randomly.
Pair Corralation between Viavi Solutions and Deswell Industries
Given the investment horizon of 90 days Viavi Solutions is expected to generate 1.08 times more return on investment than Deswell Industries. However, Viavi Solutions is 1.08 times more volatile than Deswell Industries. It trades about 0.13 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.11 per unit of risk. If you would invest 901.00 in Viavi Solutions on September 3, 2024 and sell it today you would earn a total of 93.00 from holding Viavi Solutions or generate 10.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Viavi Solutions vs. Deswell Industries
Performance |
| Timeline |
| Viavi Solutions |
| Deswell Industries |
Viavi Solutions and Deswell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Viavi Solutions and Deswell Industries
The main advantage of trading using opposite Viavi Solutions and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viavi Solutions 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.| Viavi Solutions vs. Ciena Corp | Viavi Solutions vs. Infinera | Viavi Solutions vs. Applied Opt | Viavi Solutions vs. Juniper Networks |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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