Correlation Between Western Digital and Vestiage

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

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

Diversification Opportunities for Western Digital and Vestiage

0.36

Correlation Coefficient

Western Digital  Vestiage

Weak diversification

The 3 months correlation between Western and Vestiage is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Vestiage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestiage 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 Vestiage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestiage has no effect on the direction of Western Digital i.e., Western Digital and Vestiage go up and down completely randomly.

Pair Corralation between Western Digital and Vestiage

Considering the 90-day investment horizon Western Digital is expected to under-perform the Vestiage. But the stock apears to be less risky and, when comparing its historical volatility, Western Digital is 32.65 times less risky than Vestiage. The stock trades about -0.01 of its potential returns per unit of risk. The Vestiage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9.90  in Vestiage on December 21, 2024 and sell it today you would lose (7.80) from holding Vestiage or give up 78.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Western Digital  vs.  Vestiage

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 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.

Vestiage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vestiage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vestiage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Vestiage

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

The idea behind Western Digital and Vestiage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.