Correlation Between Western Digital and Digi International
Can any of the company-specific risk be diversified away by investing in both Western Digital and Digi International 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 Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Digi International, you can compare the effects of market volatilities on Western Digital and Digi International 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 Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Digi International.
Diversification Opportunities for Western Digital and Digi International
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Digi is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Western Digital i.e., Western Digital and Digi International go up and down completely randomly.
Pair Corralation between Western Digital and Digi International
Considering the 90-day investment horizon Western Digital is expected to generate 0.93 times more return on investment than Digi International. However, Western Digital is 1.08 times less risky than Digi International. It trades about 0.06 of its potential returns per unit of risk. Digi International is currently generating about -0.01 per unit of risk. If you would invest 3,479 in Western Digital on August 24, 2024 and sell it today you would earn a total of 3,109 from holding Western Digital or generate 89.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Digital vs. Digi International
Performance |
| Timeline |
| Western Digital |
| Digi International |
Western Digital and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Digi International
The main advantage of trading using opposite Western Digital and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Digi International 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 Digi International will offset losses from the drop in Digi International's long position.| Western Digital vs. NetApp Inc | Western Digital vs. Pure Storage | Western Digital vs. Super Micro Computer | Western Digital vs. Arista Networks |
| Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
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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