Correlation Between Western Digital and FTAI Aviation
Can any of the company-specific risk be diversified away by investing in both Western Digital and FTAI Aviation 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 FTAI Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and FTAI Aviation Ltd, you can compare the effects of market volatilities on Western Digital and FTAI Aviation 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 FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and FTAI Aviation.
Diversification Opportunities for Western Digital and FTAI Aviation
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and FTAI is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Western Digital i.e., Western Digital and FTAI Aviation go up and down completely randomly.
Pair Corralation between Western Digital and FTAI Aviation
Considering the 90-day investment horizon Western Digital is expected to generate 4.12 times more return on investment than FTAI Aviation. However, Western Digital is 4.12 times more volatile than FTAI Aviation Ltd. It trades about 0.07 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.12 per unit of risk. If you would invest 4,839 in Western Digital on August 27, 2024 and sell it today you would earn a total of 1,804 from holding Western Digital or generate 37.28% 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. FTAI Aviation Ltd
Performance |
| Timeline |
| Western Digital |
| FTAI Aviation |
Western Digital and FTAI Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and FTAI Aviation
The main advantage of trading using opposite Western Digital and FTAI Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, FTAI Aviation 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 FTAI Aviation will offset losses from the drop in FTAI Aviation's long position.| Western Digital vs. D Wave Quantum | Western Digital vs. Rigetti Computing | Western Digital vs. Cricut Inc | Western Digital vs. Quantum Computing |
| FTAI Aviation vs. Ryder System | FTAI Aviation vs. Air Lease | FTAI Aviation vs. Vestis | FTAI Aviation vs. Willis Lease Finance |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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