Correlation Between NetApp and Dell Technologies

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

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

Diversification Opportunities for NetApp and Dell Technologies

0.79

Correlation Coefficient

NetApp  Dell Technologies

Poor diversification

The 3 months correlation between NetApp and Dell is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies and NetApp 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 NetApp Inc are associated (or correlated) with Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of NetApp i.e., NetApp and Dell Technologies go up and down completely randomly.

Pair Corralation between NetApp and Dell Technologies

Given the investment horizon of 90 days NetApp Inc is expected to under-perform the Dell Technologies. But the stock apears to be less risky and, when comparing its historical volatility, NetApp Inc is 1.12 times less risky than Dell Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The Dell Technologies is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  11,436  in Dell Technologies on December 28, 2024 and sell it today you would lose (1,726) from holding Dell Technologies or give up 15.09% of portfolio value over 90 days.

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

NetApp Inc  vs.  Dell Technologies

NetApp Inc

Risk-Adjusted Performance

Very Weak

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

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NetApp and Dell Technologies

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

The idea behind NetApp Inc and Dell Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.