Correlation Between EOG Resources and Seagate Technology

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

By analyzing existing cross correlation between EOG Resources and Seagate Technology Holdings, you can compare the effects of market volatilities on EOG Resources and Seagate Technology 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 EOG Resources with a short position of Seagate Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Seagate Technology.

Diversification Opportunities for EOG Resources and Seagate Technology

-0.11

Correlation Coefficient

EOG Resources  Seagate Technology

Good diversification

The 3 months correlation between EOG and Seagate is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology and EOG Resources 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 EOG Resources are associated (or correlated) with Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology has no effect on the direction of EOG Resources i.e., EOG Resources and Seagate Technology go up and down completely randomly.

Pair Corralation between EOG Resources and Seagate Technology

Assuming the 90 days trading horizon EOG Resources is expected to generate 0.88 times more return on investment than Seagate Technology. However, EOG Resources is 1.14 times less risky than Seagate Technology. It trades about 0.07 of its potential returns per unit of risk. Seagate Technology Holdings is currently generating about -0.06 per unit of risk. If you would invest  36,365  in EOG Resources on October 7, 2024 and sell it today you would earn a total of  1,521  from holding EOG Resources or generate 4.18% return on investment over 90 days.

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

EOG Resources  vs.  Seagate Technology Holdings

EOG Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, EOG Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seagate Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seagate Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seagate Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EOG Resources and Seagate Technology

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

The idea behind EOG Resources and Seagate Technology Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.