Correlation Between Aviat Networks and Seagate Technology

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

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

Diversification Opportunities for Aviat Networks and Seagate Technology

0.16

Correlation Coefficient

Aviat Networks  Seagate Technology

Average diversification

The 3 months correlation between Aviat and Seagate is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aviat Networks 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 Aviat Networks 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 Aviat Networks 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 Aviat Networks i.e., Aviat Networks and Seagate Technology go up and down completely randomly.

Pair Corralation between Aviat Networks and Seagate Technology

Given the investment horizon of 90 days Aviat Networks is expected to under-perform the Seagate Technology. But the stock apears to be less risky and, when comparing its historical volatility, Aviat Networks is 1.16 times less risky than Seagate Technology. The stock trades about -0.3 of its potential returns per unit of risk. The Seagate Technology PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,545  in Seagate Technology PLC on June 9, 2024 and sell it today you would earn a total of  253.00  from holding Seagate Technology PLC or generate 2.65% return on investment over 90 days.

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

Aviat Networks  vs.  Seagate Technology PLC

Aviat Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviat Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Aviat Networks and Seagate Technology

The main advantage of trading using opposite Aviat Networks and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aviat Networks 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 Aviat Networks 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.