Correlation Between Gen Digital and Dell Technologies

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

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

Diversification Opportunities for Gen Digital and Dell Technologies

0.69

Correlation Coefficient

Gen Digital  Dell Technologies

Poor diversification

The 3 months correlation between Gen and Dell is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies and Gen Digital 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 Gen Digital 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 Gen Digital i.e., Gen Digital and Dell Technologies go up and down completely randomly.

Pair Corralation between Gen Digital and Dell Technologies

Assuming the 90 days trading horizon Gen Digital is expected to generate 3.07 times less return on investment than Dell Technologies. But when comparing it to its historical volatility, Gen Digital is 1.72 times less risky than Dell Technologies. It trades about 0.05 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  20,970  in Dell Technologies on October 4, 2024 and sell it today you would earn a total of  50,005  from holding Dell Technologies or generate 238.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.17%
Values	Daily Returns

Gen Digital  vs.  Dell Technologies

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Dell Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gen Digital and Dell Technologies

The main advantage of trading using opposite Gen Digital and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gen Digital 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 Gen Digital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.