Correlation Between Western Digital and Zeo Energy

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

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

Diversification Opportunities for Western Digital and Zeo Energy

-0.33

Correlation Coefficient

Western Digital  Zeo Energy

Very good diversification

The 3 months correlation between Western and Zeo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Zeo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeo Energy Corp 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 Zeo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeo Energy Corp has no effect on the direction of Western Digital i.e., Western Digital and Zeo Energy go up and down completely randomly.

Pair Corralation between Western Digital and Zeo Energy

Considering the 90-day investment horizon Western Digital is expected to generate 23.72 times less return on investment than Zeo Energy. But when comparing it to its historical volatility, Western Digital is 9.13 times less risky than Zeo Energy. It trades about 0.04 of its potential returns per unit of risk. Zeo Energy Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Zeo Energy Corp on October 24, 2024 and sell it today you would lose (1.01) from holding Zeo Energy Corp or give up 9.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.87%
Values	Daily Returns

Western Digital  vs.  Zeo Energy Corp

Western Digital

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Zeo Energy Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zeo Energy Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Zeo Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Zeo Energy

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

The idea behind Western Digital and Zeo Energy Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.