Correlation Between Western Digital and Corsair Gaming

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

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

Diversification Opportunities for Western Digital and Corsair Gaming

0.65

Correlation Coefficient

Western Digital  Corsair Gaming

Poor diversification

The 3 months correlation between Western and Corsair is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Corsair Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corsair Gaming 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 Corsair Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corsair Gaming has no effect on the direction of Western Digital i.e., Western Digital and Corsair Gaming go up and down completely randomly.

Pair Corralation between Western Digital and Corsair Gaming

Assuming the 90 days horizon Western Digital is expected to generate 1.02 times less return on investment than Corsair Gaming. But when comparing it to its historical volatility, Western Digital is 1.69 times less risky than Corsair Gaming. It trades about 0.14 of its potential returns per unit of risk. Corsair Gaming is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  577.00  in Corsair Gaming on September 4, 2024 and sell it today you would earn a total of  112.00  from holding Corsair Gaming or generate 19.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Western Digital  vs.  Corsair Gaming

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. Despite nearly fragile basic indicators, Western Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Corsair Gaming

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Corsair Gaming are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corsair Gaming reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Corsair Gaming

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

The idea behind Western Digital and Corsair Gaming 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 Global Correlations module to find global opportunities by holding instruments from different markets.