Correlation Between Safety Shot and Western Digital

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

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

Diversification Opportunities for Safety Shot and Western Digital

0.08

Correlation Coefficient

Safety Shot  Western Digital

Significant diversification

The 3 months correlation between Safety and Western is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Safety Shot and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Safety Shot 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 Safety Shot 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 Safety Shot i.e., Safety Shot and Western Digital go up and down completely randomly.

Pair Corralation between Safety Shot and Western Digital

Given the investment horizon of 90 days Safety Shot is expected to generate 1.96 times more return on investment than Western Digital. However, Safety Shot is 1.96 times more volatile than Western Digital. It trades about -0.09 of its potential returns per unit of risk. Western Digital is currently generating about -0.21 per unit of risk. If you would invest  85.00  in Safety Shot on September 25, 2024 and sell it today you would lose (9.40) from holding Safety Shot or give up 11.06% of portfolio value over 90 days.

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

Safety Shot  vs.  Western Digital

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Safety Shot and Western Digital

The main advantage of trading using opposite Safety Shot and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Shot 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 Safety Shot 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.