Correlation Between Western Digital and Space-Communication

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

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

Diversification Opportunities for Western Digital and Space-Communication

0.0

Correlation Coefficient

Western Digital  Space-Communication

Pay attention - limited upside

The 3 months correlation between Western and Space-Communication is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication 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 Space-Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of Western Digital i.e., Western Digital and Space-Communication go up and down completely randomly.

Pair Corralation between Western Digital and Space-Communication

If you would invest  4,923  in Western Digital on December 2, 2024 and sell it today you would lose (30.00) from holding Western Digital or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Western Digital  vs.  Space Communication

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 latest weak 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.

Space Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space-Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Digital and Space-Communication

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

The idea behind Western Digital and Space Communication 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.