Correlation Between Seagate Technology and SPI Energy
Can any of the company-specific risk be diversified away by investing in both Seagate Technology and SPI Energy 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 SPI Energy 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 SPI Energy Co, you can compare the effects of market volatilities on Seagate Technology and SPI Energy 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 SPI Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seagate Technology and SPI Energy.
Diversification Opportunities for Seagate Technology and SPI Energy
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Seagate and SPI is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy 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 SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of Seagate Technology i.e., Seagate Technology and SPI Energy go up and down completely randomly.
Pair Corralation between Seagate Technology and SPI Energy
Considering the 90-day investment horizon Seagate Technology PLC is expected to generate 0.49 times more return on investment than SPI Energy. However, Seagate Technology PLC is 2.04 times less risky than SPI Energy. It trades about 0.03 of its potential returns per unit of risk. SPI Energy Co is currently generating about -0.04 per unit of risk. If you would invest 6,765 in Seagate Technology PLC on January 19, 2024 and sell it today you would earn a total of 1,690 from holding Seagate Technology PLC or generate 24.98% 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. SPI Energy Co
Performance |
| Timeline |
| Seagate Technology PLC |
| SPI Energy |
Seagate Technology and SPI Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seagate Technology and SPI Energy
The main advantage of trading using opposite Seagate Technology and SPI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seagate Technology position performs unexpectedly, SPI Energy 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 SPI Energy will offset losses from the drop in SPI Energy's long position.The idea behind Seagate Technology PLC and SPI Energy Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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