Correlation Between HP and Western Digital

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

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

Diversification Opportunities for HP and Western Digital

0.64

Correlation Coefficient

HP  Western Digital

Poor diversification

The 3 months correlation between HP and Western is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and HP 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 HP Inc 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 HP i.e., HP and Western Digital go up and down completely randomly.

Pair Corralation between HP and Western Digital

Considering the 90-day investment horizon HP Inc is expected to under-perform the Western Digital. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 1.33 times less risky than Western Digital. The stock trades about -0.04 of its potential returns per unit of risk. The Western Digital is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,826  in Western Digital on March 5, 2025 and sell it today you would lose (456.00) from holding Western Digital or give up 7.83% of portfolio value over 90 days.

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

HP Inc  vs.  Western Digital

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Western Digital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 6 (%) 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.

Pair Trading with HP and Western Digital

The main advantage of trading using opposite HP and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..