Correlation Between Western Digital and Ziff Davis

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

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

Diversification Opportunities for Western Digital and Ziff Davis

0.59

Correlation Coefficient

Western Digital  Ziff Davis

Very weak diversification

The 3 months correlation between Western and Ziff is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Ziff Davis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziff Davis 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 Ziff Davis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziff Davis has no effect on the direction of Western Digital i.e., Western Digital and Ziff Davis go up and down completely randomly.

Pair Corralation between Western Digital and Ziff Davis

Considering the 90-day investment horizon Western Digital is expected to generate 1.15 times more return on investment than Ziff Davis. However, Western Digital is 1.15 times more volatile than Ziff Davis. It trades about -0.03 of its potential returns per unit of risk. Ziff Davis is currently generating about -0.2 per unit of risk. If you would invest  4,664  in Western Digital on December 26, 2024 and sell it today you would lose (325.00) from holding Western Digital or give up 6.97% of portfolio value over 90 days.

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

Western Digital  vs.  Ziff Davis

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.

Ziff Davis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ziff Davis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Pair Trading with Western Digital and Ziff Davis

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

The idea behind Western Digital and Ziff Davis 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.