Correlation Between Western Digital and Companhia Paranaense

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

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

Diversification Opportunities for Western Digital and Companhia Paranaense

0.36

Correlation Coefficient

Western Digital  Companhia Paranaense

Weak diversification

The 3 months correlation between Western and Companhia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Western Digital i.e., Western Digital and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Western Digital and Companhia Paranaense

Considering the 90-day investment horizon Western Digital is expected to generate 1.23 times more return on investment than Companhia Paranaense. However, Western Digital is 1.23 times more volatile than Companhia Paranaense de. It trades about -0.1 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.14 per unit of risk. If you would invest  4,869  in Western Digital on December 4, 2024 and sell it today you would lose (355.00) from holding Western Digital or give up 7.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Western Digital  vs.  Companhia Paranaense de

Western Digital

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Companhia Paranaense

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Companhia Paranaense 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 Companhia Paranaense

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

The idea behind Western Digital and Companhia Paranaense de 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.