Correlation Between Western Digital and VanEck Pharmaceutical

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

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

Diversification Opportunities for Western Digital and VanEck Pharmaceutical

-0.24

Correlation Coefficient

Western Digital  VanEck Pharmaceutical

Very good diversification

The 3 months correlation between Western and VanEck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and VanEck Pharmaceutical ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Pharmaceutical ETF 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 VanEck Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Pharmaceutical ETF has no effect on the direction of Western Digital i.e., Western Digital and VanEck Pharmaceutical go up and down completely randomly.

Pair Corralation between Western Digital and VanEck Pharmaceutical

Considering the 90-day investment horizon Western Digital is expected to generate 3.68 times more return on investment than VanEck Pharmaceutical. However, Western Digital is 3.68 times more volatile than VanEck Pharmaceutical ETF. It trades about 0.14 of its potential returns per unit of risk. VanEck Pharmaceutical ETF is currently generating about 0.07 per unit of risk. If you would invest  6,498  in Western Digital on February 22, 2024 and sell it today you would earn a total of  856.00  from holding Western Digital or generate 13.17% return on investment over 90 days.

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

Western Digital  vs.  VanEck Pharmaceutical ETF

Western Digital

Risk-Adjusted Performance

15 of 100

Solid

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 unfluctuating fundamental indicators, Western Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

VanEck Pharmaceutical ETF

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Pharmaceutical ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck Pharmaceutical is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Digital and VanEck Pharmaceutical

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

The idea behind Western Digital and VanEck Pharmaceutical ETF 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.