Correlation Between GENERAL and Western Digital

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

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

Diversification Opportunities for GENERAL and Western Digital

0.05

Correlation Coefficient

GENERAL  Western Digital

Significant diversification

The 3 months correlation between GENERAL and Western is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and Western Digital go up and down completely randomly.

Pair Corralation between GENERAL and Western Digital

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to under-perform the Western Digital. In addition to that, GENERAL is 1.03 times more volatile than Western Digital. It trades about -0.1 of its total potential returns per unit of risk. Western Digital is currently generating about 0.06 per unit of volatility. If you would invest  6,502  in Western Digital on September 13, 2024 and sell it today you would earn a total of  488.00  from holding Western Digital or generate 7.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.79%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Western Digital

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond'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 GENERAL ELEC CAP investors.

Western Digital

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Western Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GENERAL and Western Digital

The main advantage of trading using opposite GENERAL and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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 GENERAL ELEC CAP 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.