Correlation Between Electronic Systems and Western Digital

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Can any of the company-specific risk be diversified away by investing in both Electronic Systems and Western Digital 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 Electronic Systems and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Systems Technology and Western Digital, you can compare the effects of market volatilities on Electronic Systems and Western Digital 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 Electronic Systems with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Systems and Western Digital.

Diversification Opportunities for Electronic Systems and Western Digital

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Electronic and Western is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Systems Technology and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Electronic Systems 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 Electronic Systems Technology are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Electronic Systems i.e., Electronic Systems and Western Digital go up and down completely randomly.

Pair Corralation between Electronic Systems and Western Digital

Given the investment horizon of 90 days Electronic Systems Technology is expected to under-perform the Western Digital. In addition to that, Electronic Systems is 1.29 times more volatile than Western Digital. It trades about -0.03 of its total potential returns per unit of risk. Western Digital is currently generating about 0.14 per unit of volatility. If you would invest  6,349  in Western Digital on March 5, 2024 and sell it today you would earn a total of  1,180  from holding Western Digital or generate 18.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Electronic Systems Technology  vs.  Western Digital

 Performance 
       Timeline  
Electronic Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Electronic Systems Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electronic Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Western Digital 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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. In spite of rather conflicting fundamental indicators, Western Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Electronic Systems and Western Digital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Electronic Systems and Western Digital

The main advantage of trading using opposite Electronic Systems and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Systems position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.
The idea behind Electronic Systems Technology and Western Digital 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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