Correlation Between Western Digital and Cannae Holdings

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

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

Diversification Opportunities for Western Digital and Cannae Holdings

0.35

Correlation Coefficient

Western Digital  Cannae Holdings

Weak diversification

The 3 months correlation between Western and Cannae is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of Western Digital i.e., Western Digital and Cannae Holdings go up and down completely randomly.

Pair Corralation between Western Digital and Cannae Holdings

Considering the 90-day investment horizon Western Digital is expected to under-perform the Cannae Holdings. In addition to that, Western Digital is 2.36 times more volatile than Cannae Holdings. It trades about -0.16 of its total potential returns per unit of risk. Cannae Holdings is currently generating about -0.2 per unit of volatility. If you would invest  2,100  in Cannae Holdings on September 23, 2024 and sell it today you would lose (101.00) from holding Cannae Holdings or give up 4.81% of portfolio value over 90 days.

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

Western Digital  vs.  Cannae Holdings

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cannae Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Digital and Cannae Holdings

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

The idea behind Western Digital and Cannae Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.