Correlation Between Fluent and Western Digital
Can any of the company-specific risk be diversified away by investing in both Fluent 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 Fluent and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fluent Inc and Western Digital, you can compare the effects of market volatilities on Fluent 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 Fluent with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fluent and Western Digital.
Diversification Opportunities for Fluent and Western Digital
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fluent and Western is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fluent Inc and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Fluent 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 Fluent Inc 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 Fluent i.e., Fluent and Western Digital go up and down completely randomly.
Pair Corralation between Fluent and Western Digital
Given the investment horizon of 90 days Fluent Inc is expected to under-perform the Western Digital. In addition to that, Fluent is 1.66 times more volatile than Western Digital. It trades about -0.06 of its total potential returns per unit of risk. Western Digital is currently generating about 0.19 per unit of volatility. If you would invest 6,588 in Western Digital on September 2, 2024 and sell it today you would earn a total of 711.00 from holding Western Digital or generate 10.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fluent Inc vs. Western Digital
Performance |
| Timeline |
| Fluent Inc |
| Western Digital |
Fluent and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fluent and Western Digital
The main advantage of trading using opposite Fluent and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluent 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 Fluent Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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