Correlation Between Seagate Technology and Kroger

Can any of the company-specific risk be diversified away by investing in both Seagate Technology and Kroger 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 Kroger 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 The Kroger Co, you can compare the effects of market volatilities on Seagate Technology and Kroger 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 Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seagate Technology and Kroger.

Diversification Opportunities for Seagate Technology and Kroger

-0.14

Correlation Coefficient

Seagate Technology  Kroger

Good diversification

The 3 months correlation between Seagate and Kroger is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology Holdings and The Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Kroger 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Kroger has no effect on the direction of Seagate Technology i.e., Seagate Technology and Kroger go up and down completely randomly.

Pair Corralation between Seagate Technology and Kroger

Assuming the 90 days trading horizon Seagate Technology Holdings is expected to generate 1.65 times more return on investment than Kroger. However, Seagate Technology is 1.65 times more volatile than The Kroger Co. It trades about 0.07 of its potential returns per unit of risk. The Kroger Co is currently generating about 0.07 per unit of risk. If you would invest  24,363  in Seagate Technology Holdings on October 10, 2024 and sell it today you would earn a total of  30,287  from holding Seagate Technology Holdings or generate 124.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Seagate Technology Holdings  vs.  The Kroger Co

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.

The Kroger

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Kroger Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kroger sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seagate Technology and Kroger

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

The idea behind Seagate Technology Holdings and The Kroger Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.