Correlation Between Western Digital and Stagwell

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

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

Diversification Opportunities for Western Digital and Stagwell

0.5

Correlation Coefficient

Western Digital  Stagwell

Very weak diversification

The 3 months correlation between Western and Stagwell is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Western Digital i.e., Western Digital and Stagwell go up and down completely randomly.

Pair Corralation between Western Digital and Stagwell

Considering the 90-day investment horizon Western Digital is expected to generate 12.67 times less return on investment than Stagwell. In addition to that, Western Digital is 1.03 times more volatile than Stagwell. It trades about 0.0 of its total potential returns per unit of risk. Stagwell is currently generating about 0.05 per unit of volatility. If you would invest  615.00  in Stagwell on October 25, 2024 and sell it today you would earn a total of  37.00  from holding Stagwell or generate 6.02% 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.  Stagwell

Western Digital

Risk-Adjusted Performance

0 of 100

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 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.

Stagwell

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stagwell are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Stagwell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Western Digital and Stagwell

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

The idea behind Western Digital and Stagwell 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.