Correlation Between LPL Financial and Seagate Technology

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

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

Diversification Opportunities for LPL Financial and Seagate Technology

-0.39

Correlation Coefficient

LPL Financial  Seagate Technology

Very good diversification

The 3 months correlation between LPL and Seagate is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology and LPL Financial 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 LPL Financial Holdings 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 LPL Financial i.e., LPL Financial and Seagate Technology go up and down completely randomly.

Pair Corralation between LPL Financial and Seagate Technology

Assuming the 90 days trading horizon LPL Financial Holdings is expected to generate 1.05 times more return on investment than Seagate Technology. However, LPL Financial is 1.05 times more volatile than Seagate Technology Holdings. It trades about 0.31 of its potential returns per unit of risk. Seagate Technology Holdings is currently generating about -0.12 per unit of risk. If you would invest  8,139  in LPL Financial Holdings on October 22, 2024 and sell it today you would earn a total of  3,657  from holding LPL Financial Holdings or generate 44.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

LPL Financial Holdings  vs.  Seagate Technology Holdings

LPL Financial Holdings

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LPL Financial and Seagate Technology

The main advantage of trading using opposite LPL Financial and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial 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 LPL Financial Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.