Correlation Between Western Digital and VHAI

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

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

Diversification Opportunities for Western Digital and VHAI

0.14

Correlation Coefficient

Western Digital  VHAI

Average diversification

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

Pair Corralation between Western Digital and VHAI

Considering the 90-day investment horizon Western Digital is expected to generate 0.19 times more return on investment than VHAI. However, Western Digital is 5.24 times less risky than VHAI. It trades about 0.05 of its potential returns per unit of risk. VHAI is currently generating about -0.17 per unit of risk. If you would invest  4,332  in Western Digital on October 23, 2024 and sell it today you would earn a total of  2,422  from holding Western Digital or generate 55.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	39.19%
Values	Daily Returns

Western Digital  vs.  VHAI

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.

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Western Digital and VHAI

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

The idea behind Western Digital and VHAI 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.