Correlation Between Kimball Electronics and Deswell Industries

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

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

Diversification Opportunities for Kimball Electronics and Deswell Industries

-0.05

Correlation Coefficient

Kimball Electronics  Deswell Industries

Good diversification

The 3 months correlation between Kimball and Deswell is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and Kimball Electronics 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 Kimball Electronics 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 Kimball Electronics i.e., Kimball Electronics and Deswell Industries go up and down completely randomly.

Pair Corralation between Kimball Electronics and Deswell Industries

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 0.96 times more return on investment than Deswell Industries. However, Kimball Electronics is 1.05 times less risky than Deswell Industries. It trades about 0.03 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.0 per unit of risk. If you would invest  1,790  in Kimball Electronics on February 12, 2024 and sell it today you would earn a total of  443.00  from holding Kimball Electronics or generate 24.75% return on investment over 90 days.

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

Kimball Electronics  vs.  Deswell Industries

Kimball Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Kimball Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Deswell Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deswell Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Deswell Industries is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kimball Electronics and Deswell Industries

The main advantage of trading using opposite Kimball Electronics and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimball Electronics 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 Kimball Electronics 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.