Correlation Between Western Digital and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both Western Digital and Addus HomeCare 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 Addus HomeCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Addus HomeCare, you can compare the effects of market volatilities on Western Digital and Addus HomeCare 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 Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Addus HomeCare.
Diversification Opportunities for Western Digital and Addus HomeCare
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Addus is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Western Digital i.e., Western Digital and Addus HomeCare go up and down completely randomly.
Pair Corralation between Western Digital and Addus HomeCare
Considering the 90-day investment horizon Western Digital is expected to generate 1.21 times more return on investment than Addus HomeCare. However, Western Digital is 1.21 times more volatile than Addus HomeCare. It trades about 0.01 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.07 per unit of risk. If you would invest 6,632 in Western Digital on August 25, 2024 and sell it today you would earn a total of 11.00 from holding Western Digital or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Digital vs. Addus HomeCare
Performance |
| Timeline |
| Western Digital |
| Addus HomeCare |
Western Digital and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Addus HomeCare
The main advantage of trading using opposite Western Digital and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.| Western Digital vs. D Wave Quantum | Western Digital vs. Rigetti Computing | Western Digital vs. Cricut Inc | Western Digital vs. Quantum Computing |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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