Correlation Between LESTE FDO and Western Digital

Can any of the company-specific risk be diversified away by investing in both LESTE FDO and Western Digital 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 LESTE FDO and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LESTE FDO INV and Western Digital, you can compare the effects of market volatilities on LESTE FDO and Western Digital 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 LESTE FDO with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of LESTE FDO and Western Digital.

Diversification Opportunities for LESTE FDO and Western Digital

-0.58

Correlation Coefficient

LESTE FDO  Western Digital

Excellent diversification

The 3 months correlation between LESTE and Western is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and LESTE FDO 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 LESTE FDO INV are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of LESTE FDO i.e., LESTE FDO and Western Digital go up and down completely randomly.

Pair Corralation between LESTE FDO and Western Digital

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the Western Digital. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 2.06 times less risky than Western Digital. The fund trades about -0.02 of its potential returns per unit of risk. The Western Digital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,457  in Western Digital on September 13, 2024 and sell it today you would earn a total of  24,267  from holding Western Digital or generate 147.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LESTE FDO INV  vs.  Western Digital

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Western Digital

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Western Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LESTE FDO and Western Digital

The main advantage of trading using opposite LESTE FDO and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LESTE FDO position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.

The idea behind LESTE FDO INV and Western Digital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.