Correlation Between Western Digital and ELECOM CO
Can any of the company-specific risk be diversified away by investing in both Western Digital and ELECOM CO 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 ELECOM CO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and ELECOM LTD, you can compare the effects of market volatilities on Western Digital and ELECOM CO 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 ELECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and ELECOM CO.
Diversification Opportunities for Western Digital and ELECOM CO
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and ELECOM is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and ELECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECOM LTD 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 ELECOM CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECOM LTD has no effect on the direction of Western Digital i.e., Western Digital and ELECOM CO go up and down completely randomly.
Pair Corralation between Western Digital and ELECOM CO
Assuming the 90 days horizon Western Digital is expected to generate 2.73 times more return on investment than ELECOM CO. However, Western Digital is 2.73 times more volatile than ELECOM LTD. It trades about 0.19 of its potential returns per unit of risk. ELECOM LTD is currently generating about 0.14 per unit of risk. If you would invest 6,038 in Western Digital on September 1, 2024 and sell it today you would earn a total of 727.00 from holding Western Digital or generate 12.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Western Digital vs. ELECOM LTD
Performance |
| Timeline |
| Western Digital |
| ELECOM LTD |
Western Digital and ELECOM CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and ELECOM CO
The main advantage of trading using opposite Western Digital and ELECOM CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, ELECOM CO 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 ELECOM CO will offset losses from the drop in ELECOM CO's long position.| Western Digital vs. SEIKO EPSON PADR | Western Digital vs. Superior Plus Corp | Western Digital vs. NMI Holdings | Western Digital vs. Origin Agritech |
| ELECOM CO vs. SEIKO EPSON PADR | ELECOM CO vs. Superior Plus Corp | ELECOM CO vs. NMI Holdings | ELECOM CO vs. Origin Agritech |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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