Correlation Between WESTERN DIGITAL and Progressive Corp
Can any of the company-specific risk be diversified away by investing in both WESTERN DIGITAL and Progressive Corp 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 Progressive Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WESTERN DIGITAL and Progressive Corp, you can compare the effects of market volatilities on WESTERN DIGITAL and Progressive Corp 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 Progressive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN DIGITAL and Progressive Corp.
Diversification Opportunities for WESTERN DIGITAL and Progressive Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WESTERN and Progressive is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN DIGITAL and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive 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 Progressive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive Corp has no effect on the direction of WESTERN DIGITAL i.e., WESTERN DIGITAL and Progressive Corp go up and down completely randomly.
Pair Corralation between WESTERN DIGITAL and Progressive Corp
Assuming the 90 days trading horizon WESTERN DIGITAL is expected to generate 1.66 times more return on investment than Progressive Corp. However, WESTERN DIGITAL is 1.66 times more volatile than Progressive Corp. It trades about 0.22 of its potential returns per unit of risk. Progressive Corp is currently generating about 0.25 per unit of risk. If you would invest 6,069 in WESTERN DIGITAL on September 2, 2024 and sell it today you would earn a total of 817.00 from holding WESTERN DIGITAL or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WESTERN DIGITAL vs. Progressive Corp
Performance |
| Timeline |
| WESTERN DIGITAL |
| Progressive Corp |
WESTERN DIGITAL and Progressive Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WESTERN DIGITAL and Progressive Corp
The main advantage of trading using opposite WESTERN DIGITAL and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESTERN DIGITAL position performs unexpectedly, Progressive Corp 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 Progressive Corp will offset losses from the drop in Progressive Corp's long position.| WESTERN DIGITAL vs. Liberty Broadband | WESTERN DIGITAL vs. Computershare Limited | WESTERN DIGITAL vs. Regions Financial | WESTERN DIGITAL vs. National Bank Holdings |
| Progressive Corp vs. Adtalem Global Education | Progressive Corp vs. CNVISION MEDIA | Progressive Corp vs. Dave Busters Entertainment | Progressive Corp vs. WILLIS LEASE FIN |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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