Correlation Between Western Digital and Joint Stock

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

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

Diversification Opportunities for Western Digital and Joint Stock

0.48

Correlation Coefficient

Western Digital  Joint Stock

Very weak diversification

The 3 months correlation between Western and Joint is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Western Digital i.e., Western Digital and Joint Stock go up and down completely randomly.

Pair Corralation between Western Digital and Joint Stock

Considering the 90-day investment horizon Western Digital is expected to under-perform the Joint Stock. In addition to that, Western Digital is 1.04 times more volatile than Joint Stock. It trades about -0.41 of its total potential returns per unit of risk. Joint Stock is currently generating about 0.03 per unit of volatility. If you would invest  9,684  in Joint Stock on December 10, 2024 and sell it today you would earn a total of  66.00  from holding Joint Stock or generate 0.68% return on investment over 90 days.

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

Western Digital  vs.  Joint Stock

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.

Joint Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Digital and Joint Stock

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

The idea behind Western Digital and Joint Stock 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.