Correlation Between Seagate Technology and Knowles Cor

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

Diversification Opportunities for Seagate Technology and Knowles Cor

-0.68

Correlation Coefficient

Seagate Technology  Knowles Cor

Excellent diversification

The 3 months correlation between Seagate and Knowles is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Seagate Technology PLC and Knowles Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles Cor 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 Knowles Cor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Cor has no effect on the direction of Seagate Technology i.e., Seagate Technology and Knowles Cor go up and down completely randomly.

Pair Corralation between Seagate Technology and Knowles Cor

Considering the 90-day investment horizon Seagate Technology PLC is expected to generate 1.06 times more return on investment than Knowles Cor. However, Seagate Technology is 1.06 times more volatile than Knowles Cor. It trades about 0.05 of its potential returns per unit of risk. Knowles Cor is currently generating about 0.05 per unit of risk. If you would invest  6,852  in Seagate Technology PLC on October 1, 2024 and sell it today you would earn a total of  1,887  from holding Seagate Technology PLC or generate 27.54% return on investment over 90 days.

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

Seagate Technology PLC  vs.  Knowles Cor

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Knowles Cor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Knowles Cor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seagate Technology and Knowles Cor

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

The idea behind Seagate Technology PLC and Knowles Cor 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.