Correlation Between CHINA SOUTHN and WESTERN DIGITAL

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

By analyzing existing cross correlation between CHINA SOUTHN AIR H and WESTERN DIGITAL, you can compare the effects of market volatilities on CHINA SOUTHN 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 CHINA SOUTHN with a short position of WESTERN DIGITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and WESTERN DIGITAL.

Diversification Opportunities for CHINA SOUTHN and WESTERN DIGITAL

0.59

Correlation Coefficient

CHINA SOUTHN  WESTERN DIGITAL

Very weak diversification

The 3 months correlation between CHINA and WESTERN is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and WESTERN DIGITAL

Assuming the 90 days trading horizon CHINA SOUTHN is expected to generate 8.77 times less return on investment than WESTERN DIGITAL. In addition to that, CHINA SOUTHN is 1.19 times more volatile than WESTERN DIGITAL. It trades about 0.05 of its total potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.49 per unit of volatility. If you would invest  3,147  in WESTERN DIGITAL on April 20, 2025 and sell it today you would earn a total of  2,610  from holding WESTERN DIGITAL or generate 82.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CHINA SOUTHN AIR H   vs.  WESTERN DIGITAL

CHINA SOUTHN AIR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CHINA SOUTHN may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WESTERN DIGITAL

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, WESTERN DIGITAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA SOUTHN and WESTERN DIGITAL

The main advantage of trading using opposite CHINA SOUTHN and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.