Correlation Between Western Digital and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both Western Digital and Hooker Furniture 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 Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Hooker Furniture, you can compare the effects of market volatilities on Western Digital and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Hooker Furniture.
Diversification Opportunities for Western Digital and Hooker Furniture
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Hooker is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Western Digital i.e., Western Digital and Hooker Furniture go up and down completely randomly.
Pair Corralation between Western Digital and Hooker Furniture
Considering the 90-day investment horizon Western Digital is expected to generate 0.84 times more return on investment than Hooker Furniture. However, Western Digital is 1.19 times less risky than Hooker Furniture. It trades about 0.04 of its potential returns per unit of risk. Hooker Furniture is currently generating about -0.02 per unit of risk. If you would invest 6,349 in Western Digital on September 1, 2024 and sell it today you would earn a total of 950.00 from holding Western Digital or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Digital vs. Hooker Furniture
Performance |
| Timeline |
| Western Digital |
| Hooker Furniture |
Western Digital and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Hooker Furniture
The main advantage of trading using opposite Western Digital and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.| Western Digital vs. Rigetti Computing | Western Digital vs. D Wave Quantum | Western Digital vs. IONQ Inc | Western Digital vs. Desktop Metal |
| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Willis Lease Finance | Hooker Furniture vs. Rocky Brands | Hooker Furniture vs. First Business Financial |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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