Correlation Between Western Digital and BANCO

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

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

Diversification Opportunities for Western Digital and BANCO

0.14

Correlation Coefficient

Western Digital  BANCO

Average diversification

The 3 months correlation between Western and BANCO is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and BANCO SANTANDER S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER S 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER S has no effect on the direction of Western Digital i.e., Western Digital and BANCO go up and down completely randomly.

Pair Corralation between Western Digital and BANCO

Considering the 90-day investment horizon Western Digital is expected to generate 3.07 times more return on investment than BANCO. However, Western Digital is 3.07 times more volatile than BANCO SANTANDER S. It trades about 0.05 of its potential returns per unit of risk. BANCO SANTANDER S is currently generating about 0.0 per unit of risk. If you would invest  4,325  in Western Digital on October 25, 2024 and sell it today you would earn a total of  2,543  from holding Western Digital or generate 58.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Western Digital  vs.  BANCO SANTANDER S

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

BANCO SANTANDER S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANCO SANTANDER S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Digital and BANCO

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

The idea behind Western Digital and BANCO SANTANDER S 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.