Correlation Between Western Digital and Rigetti Computing

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

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

Diversification Opportunities for Western Digital and Rigetti Computing

0.55

Correlation Coefficient

Western Digital  Rigetti Computing

Very weak diversification

The 3 months correlation between Western and Rigetti is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Rigetti Computing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rigetti Computing 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 Rigetti Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rigetti Computing has no effect on the direction of Western Digital i.e., Western Digital and Rigetti Computing go up and down completely randomly.

Pair Corralation between Western Digital and Rigetti Computing

Considering the 90-day investment horizon Western Digital is expected to generate 24.19 times less return on investment than Rigetti Computing. But when comparing it to its historical volatility, Western Digital is 5.87 times less risky than Rigetti Computing. It trades about 0.07 of its potential returns per unit of risk. Rigetti Computing is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Rigetti Computing on September 14, 2024 and sell it today you would earn a total of  515.00  from holding Rigetti Computing or generate 628.05% 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.  Rigetti Computing

Western Digital

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rigetti Computing

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rigetti Computing are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Rigetti Computing demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Rigetti Computing

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

The idea behind Western Digital and Rigetti Computing 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.