Correlation Between WESTERN DIGITAL and OtelloASA

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

By analyzing existing cross correlation between WESTERN DIGITAL and Otello ASA, you can compare the effects of market volatilities on WESTERN DIGITAL and OtelloASA 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 OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTERN DIGITAL and OtelloASA.

Diversification Opportunities for WESTERN DIGITAL and OtelloASA

-0.5

Correlation Coefficient

WESTERN DIGITAL  OtelloASA

Very good diversification

The 3 months correlation between WESTERN and OtelloASA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN DIGITAL and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of WESTERN DIGITAL i.e., WESTERN DIGITAL and OtelloASA go up and down completely randomly.

Pair Corralation between WESTERN DIGITAL and OtelloASA

Assuming the 90 days trading horizon WESTERN DIGITAL is expected to generate 1.29 times more return on investment than OtelloASA. However, WESTERN DIGITAL is 1.29 times more volatile than Otello ASA. It trades about 0.15 of its potential returns per unit of risk. Otello ASA is currently generating about -0.06 per unit of risk. If you would invest  5,667  in WESTERN DIGITAL on September 3, 2024 and sell it today you would earn a total of  1,239  from holding WESTERN DIGITAL or generate 21.86% 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.  Otello ASA

WESTERN DIGITAL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, WESTERN DIGITAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OtelloASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WESTERN DIGITAL and OtelloASA

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

The idea behind WESTERN DIGITAL and Otello ASA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.