Correlation Between Western Digital and Apartment Investment

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

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

Diversification Opportunities for Western Digital and Apartment Investment

0.46

Correlation Coefficient

Western Digital  Apartment Investment

Very weak diversification

The 3 months correlation between Western and Apartment is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and Western Digital 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 are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Western Digital i.e., Western Digital and Apartment Investment go up and down completely randomly.

Pair Corralation between Western Digital and Apartment Investment

Assuming the 90 days trading horizon Western Digital is expected to generate 17.06 times less return on investment than Apartment Investment. In addition to that, Western Digital is 1.43 times more volatile than Apartment Investment and. It trades about 0.01 of its total potential returns per unit of risk. Apartment Investment and is currently generating about 0.15 per unit of volatility. If you would invest  4,890  in Apartment Investment and on October 6, 2024 and sell it today you would earn a total of  696.00  from holding Apartment Investment and or generate 14.23% return on investment over 90 days.

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

Western Digital  vs.  Apartment Investment and

Western Digital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apartment Investment and

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Apartment Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Apartment Investment

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

The idea behind Western Digital and Apartment Investment and 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.