Correlation Between Western Digital and Hoteles City

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

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

Diversification Opportunities for Western Digital and Hoteles City

-0.45

Correlation Coefficient

Western Digital  Hoteles City

Very good diversification

The 3 months correlation between Western and Hoteles is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Hoteles City Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles City Express 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 Hoteles City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles City Express has no effect on the direction of Western Digital i.e., Western Digital and Hoteles City go up and down completely randomly.

Pair Corralation between Western Digital and Hoteles City

Assuming the 90 days trading horizon Western Digital is expected to generate 1.07 times more return on investment than Hoteles City. However, Western Digital is 1.07 times more volatile than Hoteles City Express. It trades about 0.06 of its potential returns per unit of risk. Hoteles City Express is currently generating about -0.04 per unit of risk. If you would invest  71,200  in Western Digital on October 11, 2024 and sell it today you would earn a total of  58,800  from holding Western Digital or generate 82.58% return on investment over 90 days.

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

Western Digital  vs.  Hoteles City Express

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. In spite of fairly unfluctuating fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles City Express 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 primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Western Digital and Hoteles City

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

The idea behind Western Digital and Hoteles City Express 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.