Correlation Between Seagate Technology and Dell Technologies

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

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

Diversification Opportunities for Seagate Technology and Dell Technologies

-0.07

Correlation Coefficient

Seagate Technology  Dell Technologies

Good diversification

The 3 months correlation between Seagate and Dell is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology Holdings and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies and Seagate Technology 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 Seagate Technology Holdings 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 Seagate Technology i.e., Seagate Technology and Dell Technologies go up and down completely randomly.

Pair Corralation between Seagate Technology and Dell Technologies

Assuming the 90 days trading horizon Seagate Technology Holdings is expected to under-perform the Dell Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Seagate Technology Holdings is 1.52 times less risky than Dell Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The Dell Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  76,700  in Dell Technologies on October 6, 2024 and sell it today you would lose (1,848) from holding Dell Technologies or give up 2.41% of portfolio value over 90 days.

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

Seagate Technology Holdings  vs.  Dell Technologies

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.

Dell Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seagate Technology and Dell Technologies

The main advantage of trading using opposite Seagate Technology and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seagate Technology 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 Seagate Technology Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.