Correlation Between Western Digital and Keurig Dr

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

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

Diversification Opportunities for Western Digital and Keurig Dr

0.71

Correlation Coefficient

Western Digital  Keurig Dr

Poor diversification

The 3 months correlation between Western and Keurig is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper 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 Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Western Digital i.e., Western Digital and Keurig Dr go up and down completely randomly.

Pair Corralation between Western Digital and Keurig Dr

Considering the 90-day investment horizon Western Digital is expected to generate 1.45 times more return on investment than Keurig Dr. However, Western Digital is 1.45 times more volatile than Keurig Dr Pepper. It trades about 0.18 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about 0.19 per unit of risk. If you would invest  6,955  in Western Digital on February 24, 2024 and sell it today you would earn a total of  461.00  from holding Western Digital or generate 6.63% return on investment over 90 days.

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

Western Digital  vs.  Keurig Dr Pepper

Western Digital

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 15 (%) 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.

Keurig Dr Pepper

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Keurig Dr reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Keurig Dr

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

The idea behind Western Digital and Keurig Dr Pepper 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.