Correlation Between G III and WESTERN DIGITAL

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

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

Diversification Opportunities for G III and WESTERN DIGITAL

0.82

Correlation Coefficient

G III  WESTERN DIGITAL

Very poor diversification

The 3 months correlation between GI4 and WESTERN is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and G III 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 G III Apparel Group 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 G III i.e., G III and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between G III and WESTERN DIGITAL

Assuming the 90 days trading horizon G III Apparel Group is expected to generate 0.5 times more return on investment than WESTERN DIGITAL. However, G III Apparel Group is 2.01 times less risky than WESTERN DIGITAL. It trades about -0.21 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about -0.13 per unit of risk. If you would invest  3,120  in G III Apparel Group on December 22, 2024 and sell it today you would lose (740.00) from holding G III Apparel Group or give up 23.72% of portfolio value over 90 days.

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

G III Apparel Group  vs.  WESTERN DIGITAL

G III Apparel

Risk-Adjusted Performance

Very Weak

Over the last 90 days G III Apparel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WESTERN DIGITAL

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with G III and WESTERN DIGITAL

The main advantage of trading using opposite G III and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G III 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 G III Apparel Group 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.