Correlation Between ELECOM CO and Western Digital

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

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

Diversification Opportunities for ELECOM CO and Western Digital

-0.78

Correlation Coefficient

ELECOM CO  Western Digital

Pay attention - limited upside

The 3 months correlation between ELECOM and Western is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ELECOM LTD and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and ELECOM CO 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 ELECOM LTD are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of ELECOM CO i.e., ELECOM CO and Western Digital go up and down completely randomly.

Pair Corralation between ELECOM CO and Western Digital

Assuming the 90 days horizon ELECOM LTD is expected to generate 0.33 times more return on investment than Western Digital. However, ELECOM LTD is 2.99 times less risky than Western Digital. It trades about 0.18 of its potential returns per unit of risk. Western Digital is currently generating about -0.15 per unit of risk. If you would invest  895.00  in ELECOM LTD on December 2, 2024 and sell it today you would earn a total of  135.00  from holding ELECOM LTD or generate 15.08% return on investment over 90 days.

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

ELECOM LTD  vs.  Western Digital

ELECOM LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELECOM LTD are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ELECOM CO reported solid returns over the last few months and may actually be approaching a breakup point.

Western Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ELECOM CO and Western Digital

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

The idea behind ELECOM LTD and Western Digital 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 Global Correlations module to find global opportunities by holding instruments from different markets.