Correlation Between Western Digital and Identiv

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

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

Diversification Opportunities for Western Digital and Identiv

-0.74

Correlation Coefficient

Western Digital  Identiv

Pay attention - limited upside

The 3 months correlation between Western and Identiv is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv 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 Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Western Digital i.e., Western Digital and Identiv go up and down completely randomly.

Pair Corralation between Western Digital and Identiv

Considering the 90-day investment horizon Western Digital is expected to generate 0.44 times more return on investment than Identiv. However, Western Digital is 2.27 times less risky than Identiv. It trades about 0.11 of its potential returns per unit of risk. Identiv is currently generating about -0.23 per unit of risk. If you would invest  6,432  in Western Digital on February 1, 2024 and sell it today you would earn a total of  619.00  from holding Western Digital or generate 9.62% return on investment over 90 days.

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

Western Digital  vs.  Identiv

Western Digital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 12 (%) 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.

Identiv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Identiv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Western Digital and Identiv

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

The idea behind Western Digital and Identiv 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.