Correlation Between Japan Asia and WESTERN DIGITAL

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

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

Diversification Opportunities for Japan Asia and WESTERN DIGITAL

0.53

Correlation Coefficient

Japan Asia  WESTERN DIGITAL

Very weak diversification

The 3 months correlation between Japan and WESTERN is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and Japan Asia 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 Japan Asia Investment 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 Japan Asia i.e., Japan Asia and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between Japan Asia and WESTERN DIGITAL

Assuming the 90 days horizon Japan Asia is expected to generate 1.04 times less return on investment than WESTERN DIGITAL. But when comparing it to its historical volatility, Japan Asia Investment is 1.54 times less risky than WESTERN DIGITAL. It trades about 0.03 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,229  in WESTERN DIGITAL on October 23, 2024 and sell it today you would earn a total of  50.00  from holding WESTERN DIGITAL or generate 0.8% return on investment over 90 days.

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

Japan Asia Investment  vs.  WESTERN DIGITAL

Japan Asia Investment

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WESTERN DIGITAL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, WESTERN DIGITAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Japan Asia and WESTERN DIGITAL

The main advantage of trading using opposite Japan Asia and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.