Correlation Between Western Digital and Biogen

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

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

Diversification Opportunities for Western Digital and Biogen

-0.22

Correlation Coefficient

Western Digital  Biogen

Very good diversification

The 3 months correlation between Western and Biogen is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Western Digital i.e., Western Digital and Biogen go up and down completely randomly.

Pair Corralation between Western Digital and Biogen

Assuming the 90 days trading horizon Western Digital is expected to generate 1.39 times more return on investment than Biogen. However, Western Digital is 1.39 times more volatile than Biogen Inc. It trades about 0.07 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.06 per unit of risk. If you would invest  61,000  in Western Digital on September 24, 2024 and sell it today you would earn a total of  63,500  from holding Western Digital or generate 104.1% return on investment over 90 days.

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

Western Digital  vs.  Biogen Inc

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 fairly strong fundamental indicators, Western Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Western Digital and Biogen

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

The idea behind Western Digital and Biogen Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.