Correlation Between Seagate Technology and HP

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

Diversification Opportunities for Seagate Technology and HP

0.4

Correlation Coefficient

Seagate Technology  HP

Very weak diversification

The 3 months correlation between Seagate and HP is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Seagate Technology i.e., Seagate Technology and HP go up and down completely randomly.

Pair Corralation between Seagate Technology and HP

Considering the 90-day investment horizon Seagate Technology PLC is expected to generate 1.23 times more return on investment than HP. However, Seagate Technology is 1.23 times more volatile than HP Inc. It trades about 0.02 of its potential returns per unit of risk. HP Inc is currently generating about -0.01 per unit of risk. If you would invest  7,537  in Seagate Technology PLC on January 19, 2024 and sell it today you would earn a total of  918.00  from holding Seagate Technology PLC or generate 12.18% return on investment over 90 days.

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

Seagate Technology PLC  vs.  HP Inc

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

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Seagate Technology and HP

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

The idea behind Seagate Technology PLC and HP Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.