Correlation Between Western Digital and TruBridge

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

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

Diversification Opportunities for Western Digital and TruBridge

0.01

Correlation Coefficient

Western Digital  TruBridge

Significant diversification

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

Pair Corralation between Western Digital and TruBridge

Considering the 90-day investment horizon Western Digital is expected to generate 2.53 times less return on investment than TruBridge. But when comparing it to its historical volatility, Western Digital is 1.39 times less risky than TruBridge. It trades about 0.06 of its potential returns per unit of risk. TruBridge is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,167  in TruBridge on December 3, 2024 and sell it today you would earn a total of  1,773  from holding TruBridge or generate 151.93% return on investment over 90 days.

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

Western Digital  vs.  TruBridge

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.

TruBridge

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TruBridge are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TruBridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and TruBridge

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

The idea behind Western Digital and TruBridge 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.