Correlation Between Western Digital and LESTE FDO
Can any of the company-specific risk be diversified away by investing in both Western Digital and LESTE FDO 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 LESTE FDO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and LESTE FDO INV, you can compare the effects of market volatilities on Western Digital and LESTE FDO 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 LESTE FDO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and LESTE FDO.
Diversification Opportunities for Western Digital and LESTE FDO
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and LESTE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and LESTE FDO INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LESTE FDO INV 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 LESTE FDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LESTE FDO INV has no effect on the direction of Western Digital i.e., Western Digital and LESTE FDO go up and down completely randomly.
Pair Corralation between Western Digital and LESTE FDO
Assuming the 90 days trading horizon Western Digital is expected to generate 1.92 times more return on investment than LESTE FDO. However, Western Digital is 1.92 times more volatile than LESTE FDO INV. It trades about 0.06 of its potential returns per unit of risk. LESTE FDO INV is currently generating about -0.03 per unit of risk. If you would invest 18,085 in Western Digital on August 26, 2024 and sell it today you would earn a total of 18,415 from holding Western Digital or generate 101.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Western Digital vs. LESTE FDO INV
Performance |
| Timeline |
| Western Digital |
| LESTE FDO INV |
Western Digital and LESTE FDO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and LESTE FDO
The main advantage of trading using opposite Western Digital and LESTE FDO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, LESTE FDO 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 LESTE FDO will offset losses from the drop in LESTE FDO's long position.| Western Digital vs. Raytheon Technologies | Western Digital vs. Livetech da Bahia | Western Digital vs. Automatic Data Processing | Western Digital vs. Cognizant Technology Solutions |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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