Correlation Between Amphenol and Deswell Industries

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

Diversification Opportunities for Amphenol and Deswell Industries

-0.89
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Amphenol and Deswell is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Amphenol and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and Amphenol 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 Amphenol 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 Amphenol i.e., Amphenol and Deswell Industries go up and down completely randomly.

Pair Corralation between Amphenol and Deswell Industries

Considering the 90-day investment horizon Amphenol is expected to generate 0.49 times more return on investment than Deswell Industries. However, Amphenol is 2.05 times less risky than Deswell Industries. It trades about 0.11 of its potential returns per unit of risk. Deswell Industries is currently generating about -0.03 per unit of risk. If you would invest  8,111  in Amphenol on December 29, 2023 and sell it today you would earn a total of  3,419  from holding Amphenol or generate 42.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Amphenol  vs.  Deswell Industries

 Performance 
       Timeline  
Amphenol 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Deswell Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Deswell Industries 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 April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amphenol and Deswell Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amphenol and Deswell Industries

The main advantage of trading using opposite Amphenol and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amphenol 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 Amphenol 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.
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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