Correlation Between Deswell Industries and Vislink Technologies

Can any of the company-specific risk be diversified away by investing in both Deswell Industries and Vislink Technologies 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 Vislink Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deswell Industries and Vislink Technologies, you can compare the effects of market volatilities on Deswell Industries and Vislink Technologies 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 Vislink Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deswell Industries and Vislink Technologies.

Diversification Opportunities for Deswell Industries and Vislink Technologies

-0.41

Correlation Coefficient

Deswell Industries  Vislink Technologies

Very good diversification

The 3 months correlation between Deswell and Vislink is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Vislink Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vislink Technologies 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 Vislink Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vislink Technologies has no effect on the direction of Deswell Industries i.e., Deswell Industries and Vislink Technologies go up and down completely randomly.

Pair Corralation between Deswell Industries and Vislink Technologies

Given the investment horizon of 90 days Deswell Industries is expected to generate 0.4 times more return on investment than Vislink Technologies. However, Deswell Industries is 2.52 times less risky than Vislink Technologies. It trades about 0.08 of its potential returns per unit of risk. Vislink Technologies is currently generating about -0.1 per unit of risk. If you would invest  236.00  in Deswell Industries on August 20, 2024 and sell it today you would earn a total of  23.00  from holding Deswell Industries or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Deswell Industries  vs.  Vislink Technologies

Deswell Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deswell Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Deswell Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vislink Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vislink Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Deswell Industries and Vislink Technologies

The main advantage of trading using opposite Deswell Industries and Vislink Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, Vislink Technologies 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 Vislink Technologies will offset losses from the drop in Vislink Technologies' long position.

The idea behind Deswell Industries and Vislink Technologies 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.