Correlation Between Canon and Seagate Technology

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

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

Diversification Opportunities for Canon and Seagate Technology

0.35

Correlation Coefficient

Canon  Seagate Technology

Weak diversification

The 3 months correlation between Canon and Seagate is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and Seagate Technology PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology PLC and Canon 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 Canon Inc are associated (or correlated) with Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology PLC has no effect on the direction of Canon i.e., Canon and Seagate Technology go up and down completely randomly.

Pair Corralation between Canon and Seagate Technology

Assuming the 90 days horizon Canon Inc is expected to generate 0.91 times more return on investment than Seagate Technology. However, Canon Inc is 1.1 times less risky than Seagate Technology. It trades about -0.18 of its potential returns per unit of risk. Seagate Technology PLC is currently generating about -0.25 per unit of risk. If you would invest  2,954  in Canon Inc on January 26, 2024 and sell it today you would lose (161.00) from holding Canon Inc or give up 5.45% of portfolio value over 90 days.

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

Canon Inc  vs.  Seagate Technology PLC

Canon Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Canon may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Seagate Technology PLC

Risk-Adjusted Performance

0 of 100

Very 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canon and Seagate Technology

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

The idea behind Canon Inc and Seagate Technology 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.