Correlation Between Western and United States

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

By analyzing existing cross correlation between Western Digital 475 and United States Steel, you can compare the effects of market volatilities on Western and United States 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 Western with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western and United States.

Diversification Opportunities for Western and United States

0.37

Correlation Coefficient

Western  United States

Weak diversification

The 3 months correlation between Western and United is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 475 and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Western 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 Western Digital 475 are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Western i.e., Western and United States go up and down completely randomly.

Pair Corralation between Western and United States

Assuming the 90 days trading horizon Western Digital 475 is expected to under-perform the United States. But the bond apears to be less risky and, when comparing its historical volatility, Western Digital 475 is 2.55 times less risky than United States. The bond trades about -0.22 of its potential returns per unit of risk. The United States Steel is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,493  in United States Steel on October 12, 2024 and sell it today you would lose (215.00) from holding United States Steel or give up 6.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Western Digital 475  vs.  United States Steel

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Western Digital 475 investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Western and United States

The main advantage of trading using opposite Western and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.

The idea behind Western Digital 475 and United States Steel 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.