Correlation Between Analog Devices and Western Midstream

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

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

Diversification Opportunities for Analog Devices and Western Midstream

-0.27

Correlation Coefficient

Analog Devices  Western Midstream

Very good diversification

The 3 months correlation between Analog and Western is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream and Analog Devices 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 Analog Devices are associated (or correlated) with Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of Analog Devices i.e., Analog Devices and Western Midstream go up and down completely randomly.

Pair Corralation between Analog Devices and Western Midstream

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Western Midstream. In addition to that, Analog Devices is 1.07 times more volatile than Western Midstream Partners. It trades about -0.1 of its total potential returns per unit of risk. Western Midstream Partners is currently generating about 0.04 per unit of volatility. If you would invest  3,743  in Western Midstream Partners on September 21, 2024 and sell it today you would earn a total of  72.00  from holding Western Midstream Partners or generate 1.92% return on investment over 90 days.

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

Analog Devices  vs.  Western Midstream Partners

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Western Midstream

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Analog Devices and Western Midstream

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

The idea behind Analog Devices and Western Midstream Partners 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.