Correlation Between Western Digital and Caixa Rio

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

By analyzing existing cross correlation between Western Digital and Caixa Rio Bravo, you can compare the effects of market volatilities on Western Digital and Caixa Rio 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 Caixa Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Caixa Rio.

Diversification Opportunities for Western Digital and Caixa Rio

-0.58

Correlation Coefficient

Western Digital  Caixa Rio

Excellent diversification

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

Pair Corralation between Western Digital and Caixa Rio

Assuming the 90 days trading horizon Western Digital is expected to generate 0.87 times more return on investment than Caixa Rio. However, Western Digital is 1.14 times less risky than Caixa Rio. It trades about 0.13 of its potential returns per unit of risk. Caixa Rio Bravo is currently generating about -0.08 per unit of risk. If you would invest  36,225  in Western Digital on September 13, 2024 and sell it today you would earn a total of  6,990  from holding Western Digital or generate 19.3% return on investment over 90 days.

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

Western Digital  vs.  Caixa Rio Bravo

Western Digital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 9 (%) 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.

Caixa Rio Bravo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixa Rio Bravo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's technical and fundamental 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.

Pair Trading with Western Digital and Caixa Rio

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

The idea behind Western Digital and Caixa Rio Bravo 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 Stocks Directory module to find actively traded stocks across global markets.