Correlation Between Fortescue Metals and WESTERN DIGITAL
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and WESTERN DIGITAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and WESTERN DIGITAL , you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of WESTERN DIGITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and WESTERN DIGITAL.
Diversification Opportunities for Fortescue Metals and WESTERN DIGITAL
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fortescue and WESTERN is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals i.e., Fortescue Metals and WESTERN DIGITAL go up and down completely randomly.
Pair Corralation between Fortescue Metals and WESTERN DIGITAL
Assuming the 90 days horizon Fortescue Metals Group is expected to generate 0.66 times more return on investment than WESTERN DIGITAL. However, Fortescue Metals Group is 1.52 times less risky than WESTERN DIGITAL. It trades about 0.15 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about -0.02 per unit of risk. If you would invest 1,103 in Fortescue Metals Group on November 6, 2024 and sell it today you would earn a total of 57.00 from holding Fortescue Metals Group or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. WESTERN DIGITAL
Performance |
| Timeline |
| Fortescue Metals |
| WESTERN DIGITAL |
Fortescue Metals and WESTERN DIGITAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and WESTERN DIGITAL
The main advantage of trading using opposite Fortescue Metals and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. CAIRN HOMES EO | Fortescue Metals vs. Richardson Electronics | Fortescue Metals vs. STMICROELECTRONICS | Fortescue Metals vs. Meiko Electronics Co |
| WESTERN DIGITAL vs. Apple Inc | WESTERN DIGITAL vs. Apple Inc | WESTERN DIGITAL vs. Apple Inc | WESTERN DIGITAL vs. Apple Inc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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