Correlation Between Seagate Technology and Desktop Metal

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

By analyzing existing cross correlation between Seagate Technology PLC and Desktop Metal, you can compare the effects of market volatilities on Seagate Technology and Desktop Metal 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 Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seagate Technology and Desktop Metal.

Diversification Opportunities for Seagate Technology and Desktop Metal

-0.3

Correlation Coefficient

Seagate Technology  Desktop Metal

Very good diversification

The 3 months correlation between Seagate and Desktop is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal 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 PLC are associated (or correlated) with Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of Seagate Technology i.e., Seagate Technology and Desktop Metal go up and down completely randomly.

Pair Corralation between Seagate Technology and Desktop Metal

Considering the 90-day investment horizon Seagate Technology is expected to generate 35.93 times less return on investment than Desktop Metal. But when comparing it to its historical volatility, Seagate Technology PLC is 6.62 times less risky than Desktop Metal. It trades about 0.03 of its potential returns per unit of risk. Desktop Metal is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Desktop Metal on December 29, 2024 and sell it today you would earn a total of  267.00  from holding Desktop Metal or generate 115.09% return on investment over 90 days.

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

Seagate Technology PLC  vs.  Desktop Metal

Seagate Technology PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seagate Technology PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Seagate Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Desktop Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Desktop Metal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seagate Technology and Desktop Metal

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

The idea behind Seagate Technology PLC and Desktop Metal 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.