Correlation Between Seagate Technology and Medtronic Plc

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

Diversification Opportunities for Seagate Technology and Medtronic Plc

-0.01

Correlation Coefficient

Seagate Technology  Medtronic Plc

Good diversification

The 3 months correlation between Seagate and Medtronic is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology Holdings and Medtronic plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic plc 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 Medtronic Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic plc has no effect on the direction of Seagate Technology i.e., Seagate Technology and Medtronic Plc go up and down completely randomly.

Pair Corralation between Seagate Technology and Medtronic Plc

Assuming the 90 days trading horizon Seagate Technology Holdings is expected to under-perform the Medtronic Plc. In addition to that, Seagate Technology is 1.58 times more volatile than Medtronic plc. It trades about -0.04 of its total potential returns per unit of risk. Medtronic plc is currently generating about 0.05 per unit of volatility. If you would invest  24,559  in Medtronic plc on December 26, 2024 and sell it today you would earn a total of  1,233  from holding Medtronic plc or generate 5.02% return on investment over 90 days.

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

Seagate Technology Holdings  vs.  Medtronic plc

Seagate Technology

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Medtronic plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Medtronic Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seagate Technology and Medtronic Plc

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

The idea behind Seagate Technology Holdings and Medtronic plc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.