Correlation Between EMCOR and Western Digital
Can any of the company-specific risk be diversified away by investing in both EMCOR and Western Digital 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 EMCOR and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Western Digital, you can compare the effects of market volatilities on EMCOR and Western Digital 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 EMCOR with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Western Digital.
Diversification Opportunities for EMCOR and Western Digital
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between EMCOR and Western is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and EMCOR 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 EMCOR Group are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of EMCOR i.e., EMCOR and Western Digital go up and down completely randomly.
Pair Corralation between EMCOR and Western Digital
Considering the 90-day investment horizon EMCOR is expected to generate 12.9 times less return on investment than Western Digital. But when comparing it to its historical volatility, EMCOR Group is 1.05 times less risky than Western Digital. It trades about 0.0 of its potential returns per unit of risk. Western Digital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,868 in Western Digital on November 28, 2024 and sell it today you would earn a total of 148.00 from holding Western Digital or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Western Digital
Performance |
| Timeline |
| EMCOR Group |
| Western Digital |
EMCOR and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Western Digital
The main advantage of trading using opposite EMCOR and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.The idea behind EMCOR Group and Western Digital 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.| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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