Correlation Between WESTERN DIGITAL and WESTERN NEW

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

By analyzing existing cross correlation between WESTERN DIGITAL and WESTERN NEW ENGL, you can compare the effects of market volatilities on WESTERN DIGITAL and WESTERN NEW 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 WESTERN NEW. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN DIGITAL and WESTERN NEW.

Diversification Opportunities for WESTERN DIGITAL and WESTERN NEW

0.18

Correlation Coefficient

WESTERN DIGITAL  WESTERN NEW

Average diversification

The 3 months correlation between WESTERN and WESTERN is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN DIGITAL and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL 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 WESTERN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of WESTERN DIGITAL i.e., WESTERN DIGITAL and WESTERN NEW go up and down completely randomly.

Pair Corralation between WESTERN DIGITAL and WESTERN NEW

Assuming the 90 days trading horizon WESTERN DIGITAL is expected to generate 1.15 times more return on investment than WESTERN NEW. However, WESTERN DIGITAL is 1.15 times more volatile than WESTERN NEW ENGL. It trades about 0.04 of its potential returns per unit of risk. WESTERN NEW ENGL is currently generating about 0.04 per unit of risk. If you would invest  5,375  in WESTERN DIGITAL on October 22, 2024 and sell it today you would earn a total of  894.00  from holding WESTERN DIGITAL or generate 16.63% return on investment over 90 days.

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

WESTERN DIGITAL  vs.  WESTERN NEW ENGL

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

WESTERN NEW ENGL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN NEW ENGL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, WESTERN NEW may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WESTERN DIGITAL and WESTERN NEW

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

The idea behind WESTERN DIGITAL and WESTERN NEW ENGL 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.