Correlation Between MAHLE Metal and Seagate Technology

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

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

Diversification Opportunities for MAHLE Metal and Seagate Technology

0.34

Correlation Coefficient

MAHLE Metal  Seagate Technology

Weak diversification

The 3 months correlation between MAHLE and Seagate is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology and MAHLE Metal 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 MAHLE Metal Leve 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 MAHLE Metal i.e., MAHLE Metal and Seagate Technology go up and down completely randomly.

Pair Corralation between MAHLE Metal and Seagate Technology

Assuming the 90 days trading horizon MAHLE Metal is expected to generate 1.58 times less return on investment than Seagate Technology. In addition to that, MAHLE Metal is 1.42 times more volatile than Seagate Technology Holdings. It trades about 0.03 of its total potential returns per unit of risk. Seagate Technology Holdings is currently generating about 0.06 per unit of volatility. If you would invest  33,757  in Seagate Technology Holdings on October 23, 2024 and sell it today you would earn a total of  25,852  from holding Seagate Technology Holdings or generate 76.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.74%
Values	Daily Returns

MAHLE Metal Leve  vs.  Seagate Technology Holdings

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 MAHLE Metal and Seagate Technology

The main advantage of trading using opposite MAHLE Metal and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal 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 MAHLE Metal Leve 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.