Correlation Between Seagate Technology and SunPower

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

Diversification Opportunities for Seagate Technology and SunPower

0.02

Correlation Coefficient

Seagate Technology  SunPower

Significant diversification

The 3 months correlation between Seagate and SunPower is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and SunPower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunPower 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 SunPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunPower has no effect on the direction of Seagate Technology i.e., Seagate Technology and SunPower go up and down completely randomly.

Pair Corralation between Seagate Technology and SunPower

Considering the 90-day investment horizon Seagate Technology PLC is expected to generate 0.28 times more return on investment than SunPower. However, Seagate Technology PLC is 3.54 times less risky than SunPower. It trades about -0.02 of its potential returns per unit of risk. SunPower is currently generating about -0.05 per unit of risk. If you would invest  8,640  in Seagate Technology PLC on January 20, 2024 and sell it today you would lose (296.00) from holding Seagate Technology PLC or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Seagate Technology PLC  vs.  SunPower

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

SunPower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunPower has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Seagate Technology and SunPower

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

The idea behind Seagate Technology PLC and SunPower 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.