Correlation Between Chesapeake Granite and WESTERN DIGITAL

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

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

Diversification Opportunities for Chesapeake Granite and WESTERN DIGITAL

0.15

Correlation Coefficient

Chesapeake Granite  WESTERN DIGITAL

Average diversification

The 3 months correlation between Chesapeake and WESTERN is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Granite Wash and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and Chesapeake Granite 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 Chesapeake Granite Wash 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 Chesapeake Granite i.e., Chesapeake Granite and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between Chesapeake Granite and WESTERN DIGITAL

Given the investment horizon of 90 days Chesapeake Granite is expected to generate 2.85 times less return on investment than WESTERN DIGITAL. But when comparing it to its historical volatility, Chesapeake Granite Wash is 1.37 times less risky than WESTERN DIGITAL. It trades about 0.02 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,997  in WESTERN DIGITAL on October 5, 2024 and sell it today you would earn a total of  1,789  from holding WESTERN DIGITAL or generate 44.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	23.33%
Values	Daily Returns

Chesapeake Granite Wash  vs.  WESTERN DIGITAL

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

WESTERN DIGITAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN DIGITAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, WESTERN DIGITAL 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 Chesapeake Granite and WESTERN DIGITAL

The main advantage of trading using opposite Chesapeake Granite and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Granite 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 Chesapeake Granite Wash 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.