Correlation Between Seagate Technology and Super Micro

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

Diversification Opportunities for Seagate Technology and Super Micro

0.25

Correlation Coefficient

Seagate Technology  Super Micro

Modest diversification

The 3 months correlation between Seagate and Super is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer 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 Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Seagate Technology i.e., Seagate Technology and Super Micro go up and down completely randomly.

Pair Corralation between Seagate Technology and Super Micro

Considering the 90-day investment horizon Seagate Technology is expected to generate 74.58 times less return on investment than Super Micro. But when comparing it to its historical volatility, Seagate Technology PLC is 3.39 times less risky than Super Micro. It trades about 0.0 of its potential returns per unit of risk. Super Micro Computer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,068  in Super Micro Computer on December 28, 2024 and sell it today you would earn a total of  358.00  from holding Super Micro Computer or generate 11.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Seagate Technology PLC  vs.  Super Micro Computer

Seagate Technology PLC

Risk-Adjusted Performance

Weak

Over the last 90 days Seagate Technology PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Super Micro Computer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seagate Technology and Super Micro

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

The idea behind Seagate Technology PLC and Super Micro Computer 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.