Correlation Between Western Digital and South Jersey

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

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

Diversification Opportunities for Western Digital and South Jersey

-0.11

Correlation Coefficient

Western Digital  South Jersey

Good diversification

The 3 months correlation between Western and South is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and South Jersey Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Jersey Industries 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 South Jersey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Jersey Industries has no effect on the direction of Western Digital i.e., Western Digital and South Jersey go up and down completely randomly.

Pair Corralation between Western Digital and South Jersey

If you would invest  6,261  in Western Digital on September 5, 2024 and sell it today you would earn a total of  908.00  from holding Western Digital or generate 14.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Western Digital  vs.  South Jersey Industries

Western Digital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Western Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

South Jersey Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Jersey Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, South Jersey is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Western Digital and South Jersey

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

The idea behind Western Digital and South Jersey Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.