Correlation Between Deswell Industries and Ubiquiti Networks

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

Diversification Opportunities for Deswell Industries and Ubiquiti Networks

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Deswell and Ubiquiti is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Deswell Industries and Ubiquiti Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquiti Networks 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 Ubiquiti Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquiti Networks has no effect on the direction of Deswell Industries i.e., Deswell Industries and Ubiquiti Networks go up and down completely randomly.

Pair Corralation between Deswell Industries and Ubiquiti Networks

Given the investment horizon of 90 days Deswell Industries is expected to generate 0.29 times more return on investment than Ubiquiti Networks. However, Deswell Industries is 3.51 times less risky than Ubiquiti Networks. It trades about 0.19 of its potential returns per unit of risk. Ubiquiti Networks is currently generating about 0.0 per unit of risk. If you would invest  224.00  in Deswell Industries on January 17, 2024 and sell it today you would earn a total of  7.00  from holding Deswell Industries or generate 3.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Deswell Industries  vs.  Ubiquiti Networks

 Performance 
       Timeline  
Deswell Industries 

Risk-Adjusted Performance

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Weak
 
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Very Weak
Over the last 90 days Deswell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Ubiquiti Networks 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Deswell Industries and Ubiquiti Networks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deswell Industries and Ubiquiti Networks

The main advantage of trading using opposite Deswell Industries and Ubiquiti Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deswell Industries position performs unexpectedly, Ubiquiti Networks 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 Ubiquiti Networks will offset losses from the drop in Ubiquiti Networks' long position.
The idea behind Deswell Industries and Ubiquiti Networks 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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