Correlation Between Gen Digital and Wex

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

By analyzing existing cross correlation between Gen Digital and Wex Inc, you can compare the effects of market volatilities on Gen Digital and Wex 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 Gen Digital with a short position of Wex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gen Digital and Wex.

Diversification Opportunities for Gen Digital and Wex

0.48

Correlation Coefficient

Gen Digital  Wex

Very weak diversification

The 3 months correlation between Gen and Wex is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Wex Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wex Inc and Gen 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 Gen Digital are associated (or correlated) with Wex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wex Inc has no effect on the direction of Gen Digital i.e., Gen Digital and Wex go up and down completely randomly.

Pair Corralation between Gen Digital and Wex

Considering the 90-day investment horizon Gen Digital is expected to generate 0.55 times more return on investment than Wex. However, Gen Digital is 1.8 times less risky than Wex. It trades about 0.14 of its potential returns per unit of risk. Wex Inc is currently generating about -0.11 per unit of risk. If you would invest  2,741  in Gen Digital on August 9, 2024 and sell it today you would earn a total of  171.00  from holding Gen Digital or generate 6.24% return on investment over 90 days.

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

Gen Digital  vs.  Wex Inc

Gen Digital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Gen Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Wex Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wex Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Wex may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Gen Digital and Wex

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

The idea behind Gen Digital and Wex Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.