Correlation Between Western Digital and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Western Digital and Fast Retailing 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 Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Fast Retailing Co, you can compare the effects of market volatilities on Western Digital and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Fast Retailing.
Diversification Opportunities for Western Digital and Fast Retailing
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Fast is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Western Digital i.e., Western Digital and Fast Retailing go up and down completely randomly.
Pair Corralation between Western Digital and Fast Retailing
Considering the 90-day investment horizon Western Digital is expected to generate 2.7 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, Western Digital is 4.64 times less risky than Fast Retailing. It trades about 0.08 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 18,825 in Fast Retailing Co on September 13, 2024 and sell it today you would earn a total of 14,765 from holding Fast Retailing Co or generate 78.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.91% |
| Values | Daily Returns |
Western Digital vs. Fast Retailing Co
Performance |
| Timeline |
| Western Digital |
| Fast Retailing |
Western Digital and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Fast Retailing
The main advantage of trading using opposite Western Digital and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
| Fast Retailing vs. Aritzia | Fast Retailing vs. Boot Barn Holdings | Fast Retailing vs. Guess Inc | Fast Retailing vs. The TJX Companies |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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