Correlation Between Western Digital and Magnite
Can any of the company-specific risk be diversified away by investing in both Western Digital and Magnite 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 Magnite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Magnite, you can compare the effects of market volatilities on Western Digital and Magnite 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 Magnite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Magnite.
Diversification Opportunities for Western Digital and Magnite
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Magnite is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite 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 Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of Western Digital i.e., Western Digital and Magnite go up and down completely randomly.
Pair Corralation between Western Digital and Magnite
Considering the 90-day investment horizon Western Digital is expected to generate 0.59 times more return on investment than Magnite. However, Western Digital is 1.69 times less risky than Magnite. It trades about 0.07 of its potential returns per unit of risk. Magnite is currently generating about 0.04 per unit of risk. If you would invest 3,621 in Western Digital on September 2, 2024 and sell it today you would earn a total of 3,678 from holding Western Digital or generate 101.57% 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. Magnite
Performance |
| Timeline |
| Western Digital |
| Magnite |
Western Digital and Magnite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Magnite
The main advantage of trading using opposite Western Digital and Magnite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital position performs unexpectedly, Magnite 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 Magnite will offset losses from the drop in Magnite's long position.| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
| Magnite vs. Deluxe | Magnite vs. Clear Channel Outdoor | Magnite vs. Entravision Communications | Magnite vs. Innovid 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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