Correlation Between Western Digital and Acumen Pharmaceuticals

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

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

Diversification Opportunities for Western Digital and Acumen Pharmaceuticals

-0.02

Correlation Coefficient

Western Digital  Acumen Pharmaceuticals

Good diversification

The 3 months correlation between Western and Acumen is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Acumen Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acumen Pharmaceuticals 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 Acumen Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acumen Pharmaceuticals has no effect on the direction of Western Digital i.e., Western Digital and Acumen Pharmaceuticals go up and down completely randomly.

Pair Corralation between Western Digital and Acumen Pharmaceuticals

Considering the 90-day investment horizon Western Digital is expected to generate 0.49 times more return on investment than Acumen Pharmaceuticals. However, Western Digital is 2.04 times less risky than Acumen Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Acumen Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest  6,325  in Western Digital on September 12, 2024 and sell it today you would earn a total of  665.00  from holding Western Digital or generate 10.51% 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.  Acumen Pharmaceuticals

Western Digital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Acumen Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acumen Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Acumen Pharmaceuticals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Digital and Acumen Pharmaceuticals

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

The idea behind Western Digital and Acumen Pharmaceuticals 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 Global Correlations module to find global opportunities by holding instruments from different markets.