Correlation Between INGERSOLL and Western Digital

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

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

Diversification Opportunities for INGERSOLL and Western Digital

0.25

Correlation Coefficient

INGERSOLL  Western Digital

Modest diversification

The 3 months correlation between INGERSOLL and Western is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding INGERSOLL RAND LUXEMBOURG FIN and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and INGERSOLL 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 INGERSOLL RAND LUXEMBOURG FIN 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 INGERSOLL i.e., INGERSOLL and Western Digital go up and down completely randomly.

Pair Corralation between INGERSOLL and Western Digital

Assuming the 90 days trading horizon INGERSOLL RAND LUXEMBOURG FIN is expected to generate 0.47 times more return on investment than Western Digital. However, INGERSOLL RAND LUXEMBOURG FIN is 2.13 times less risky than Western Digital. It trades about 0.14 of its potential returns per unit of risk. Western Digital is currently generating about -0.03 per unit of risk. If you would invest  8,841  in INGERSOLL RAND LUXEMBOURG FIN on December 25, 2024 and sell it today you would earn a total of  253.00  from holding INGERSOLL RAND LUXEMBOURG FIN or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	26.67%
Values	Daily Returns

INGERSOLL RAND LUXEMBOURG FIN  vs.  Western Digital

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INGERSOLL RAND LUXEMBOURG FIN are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INGERSOLL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with INGERSOLL and Western Digital

The main advantage of trading using opposite INGERSOLL and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INGERSOLL 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 INGERSOLL RAND LUXEMBOURG FIN 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.