Correlation Between USWE SPORTS and WESTERN DIGITAL

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

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

Diversification Opportunities for USWE SPORTS and WESTERN DIGITAL

0.09

Correlation Coefficient

USWE SPORTS  WESTERN DIGITAL

Significant diversification

The 3 months correlation between USWE and WESTERN is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and USWE SPORTS 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 USWE SPORTS AB 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 USWE SPORTS i.e., USWE SPORTS and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between USWE SPORTS and WESTERN DIGITAL

Assuming the 90 days horizon USWE SPORTS AB is expected to generate 1.07 times more return on investment than WESTERN DIGITAL. However, USWE SPORTS is 1.07 times more volatile than WESTERN DIGITAL. It trades about 0.35 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.22 per unit of risk. If you would invest  73.00  in USWE SPORTS AB on October 24, 2024 and sell it today you would earn a total of  10.00  from holding USWE SPORTS AB or generate 13.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

USWE SPORTS AB  vs.  WESTERN DIGITAL

USWE SPORTS AB

Risk-Adjusted Performance

14 of 100

Good

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

WESTERN DIGITAL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WESTERN DIGITAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with USWE SPORTS and WESTERN DIGITAL

The main advantage of trading using opposite USWE SPORTS and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USWE SPORTS 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 USWE SPORTS AB 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.