Correlation Between Beyond Meat and Western Digital

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

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

Diversification Opportunities for Beyond Meat and Western Digital

-0.7

Correlation Coefficient

Beyond Meat  Western Digital

Excellent diversification

The 3 months correlation between Beyond and Western is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Meat and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Beyond Meat 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 Beyond Meat 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 Beyond Meat i.e., Beyond Meat and Western Digital go up and down completely randomly.

Pair Corralation between Beyond Meat and Western Digital

Assuming the 90 days trading horizon Beyond Meat is expected to under-perform the Western Digital. In addition to that, Beyond Meat is 1.34 times more volatile than Western Digital. It trades about -0.12 of its total potential returns per unit of risk. Western Digital is currently generating about 0.03 per unit of volatility. If you would invest  36,225  in Western Digital on October 7, 2024 and sell it today you would earn a total of  1,392  from holding Western Digital or generate 3.84% return on investment over 90 days.

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

Beyond Meat  vs.  Western Digital

Beyond Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Western Digital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Beyond Meat and Western Digital

The main advantage of trading using opposite Beyond Meat and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beyond Meat 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 Beyond Meat 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.