Correlation Between Digi International and Western Digital
Can any of the company-specific risk be diversified away by investing in both Digi International 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 Digi International and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digi International and Western Digital, you can compare the effects of market volatilities on Digi International 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 Digi International with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and Western Digital.
Diversification Opportunities for Digi International and Western Digital
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digi and Western is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Digi International 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 Digi International 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 Digi International i.e., Digi International and Western Digital go up and down completely randomly.
Pair Corralation between Digi International and Western Digital
Given the investment horizon of 90 days Digi International is expected to generate 1.22 times more return on investment than Western Digital. However, Digi International is 1.22 times more volatile than Western Digital. It trades about 0.01 of its potential returns per unit of risk. Western Digital is currently generating about -0.12 per unit of risk. If you would invest 2,838 in Digi International on December 11, 2024 and sell it today you would lose (40.00) from holding Digi International or give up 1.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Digi International vs. Western Digital
Performance |
Timeline |
Digi International |
Western Digital |
Digi International and Western Digital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Digi International and Western Digital
The main advantage of trading using opposite Digi International and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International 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.Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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