Correlation Between Quantum and Deswell Industries

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

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

Diversification Opportunities for Quantum and Deswell Industries

-0.57

Correlation Coefficient

Quantum  Deswell Industries

Excellent diversification

The 3 months correlation between Quantum and Deswell is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries and Quantum 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 Quantum 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 Quantum i.e., Quantum and Deswell Industries go up and down completely randomly.

Pair Corralation between Quantum and Deswell Industries

Given the investment horizon of 90 days Quantum is expected to under-perform the Deswell Industries. In addition to that, Quantum is 3.72 times more volatile than Deswell Industries. It trades about -0.18 of its total potential returns per unit of risk. Deswell Industries is currently generating about 0.1 per unit of volatility. If you would invest  222.00  in Deswell Industries on February 1, 2024 and sell it today you would earn a total of  6.00  from holding Deswell Industries or generate 2.7% return on investment over 90 days.

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

Quantum  vs.  Deswell Industries

Quantum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Deswell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deswell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Deswell Industries is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Quantum and Deswell Industries

The main advantage of trading using opposite Quantum and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantum 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 Quantum 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.