Correlation Between Western Digital and Fras Le

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

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

Diversification Opportunities for Western Digital and Fras Le

0.21

Correlation Coefficient

Western Digital  Fras Le

Modest diversification

The 3 months correlation between Western and Fras is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA 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 Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Western Digital i.e., Western Digital and Fras Le go up and down completely randomly.

Pair Corralation between Western Digital and Fras Le

Assuming the 90 days trading horizon Western Digital is expected to generate 5.01 times less return on investment than Fras Le. But when comparing it to its historical volatility, Western Digital is 1.77 times less risky than Fras Le. It trades about 0.02 of its potential returns per unit of risk. Fras le SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,953  in Fras le SA on September 1, 2024 and sell it today you would earn a total of  83.00  from holding Fras le SA or generate 4.25% return on investment over 90 days.

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

Western Digital  vs.  Fras le SA

Western Digital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Western Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fras le SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Digital and Fras Le

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

The idea behind Western Digital and Fras le SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.