Correlation Between Western Digital and Employers Holdings

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

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

Diversification Opportunities for Western Digital and Employers Holdings

0.15

Correlation Coefficient

Western Digital  Employers Holdings

Average diversification

The 3 months correlation between Western and Employers is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Western Digital i.e., Western Digital and Employers Holdings go up and down completely randomly.

Pair Corralation between Western Digital and Employers Holdings

Considering the 90-day investment horizon Western Digital is expected to under-perform the Employers Holdings. In addition to that, Western Digital is 1.4 times more volatile than Employers Holdings. It trades about -0.07 of its total potential returns per unit of risk. Employers Holdings is currently generating about 0.07 per unit of volatility. If you would invest  4,770  in Employers Holdings on September 30, 2024 and sell it today you would earn a total of  319.00  from holding Employers Holdings or generate 6.69% return on investment over 90 days.

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

Western Digital  vs.  Employers Holdings

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Employers Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Digital and Employers Holdings

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

The idea behind Western Digital and Employers Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.