Correlation Between Western Digital and Paysafe

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

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

Diversification Opportunities for Western Digital and Paysafe

0.01

Correlation Coefficient

Western Digital  Paysafe

Significant diversification

The 3 months correlation between Western and Paysafe is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe 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 Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of Western Digital i.e., Western Digital and Paysafe go up and down completely randomly.

Pair Corralation between Western Digital and Paysafe

Considering the 90-day investment horizon Western Digital is expected to generate 4.52 times less return on investment than Paysafe. In addition to that, Western Digital is 1.08 times more volatile than Paysafe. It trades about 0.04 of its total potential returns per unit of risk. Paysafe is currently generating about 0.18 per unit of volatility. If you would invest  1,706  in Paysafe on September 18, 2024 and sell it today you would earn a total of  143.00  from holding Paysafe or generate 8.38% return on investment over 90 days.

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

Western Digital  vs.  Paysafe

Western Digital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Western Digital and Paysafe

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

The idea behind Western Digital and Paysafe 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.