Correlation Between Western Digital and Fiat Chrysler

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

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

Diversification Opportunities for Western Digital and Fiat Chrysler

0.0

Correlation Coefficient

Western Digital  Fiat Chrysler

Pay attention - limited upside

The 3 months correlation between Western and Fiat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Fiat Chrysler Automobiles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiat Chrysler Automobiles 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 Fiat Chrysler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiat Chrysler Automobiles has no effect on the direction of Western Digital i.e., Western Digital and Fiat Chrysler go up and down completely randomly.

Pair Corralation between Western Digital and Fiat Chrysler

If you would invest (100.00) in Fiat Chrysler Automobiles on February 6, 2024 and sell it today you would earn a total of  100.00  from holding Fiat Chrysler Automobiles or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Western Digital  vs.  Fiat Chrysler Automobiles

Western Digital

Risk-Adjusted Performance

11 of 100

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.

Fiat Chrysler Automobiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiat Chrysler Automobiles has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fiat Chrysler is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Digital and Fiat Chrysler

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

The idea behind Western Digital and Fiat Chrysler Automobiles 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.