Correlation Between Dell Technologies and Leidos Holdings
Can any of the company-specific risk be diversified away by investing in both Dell Technologies and Leidos Holdings 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 Dell Technologies and Leidos Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dell Technologies and Leidos Holdings, you can compare the effects of market volatilities on Dell Technologies and Leidos Holdings 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 Dell Technologies with a short position of Leidos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Leidos Holdings.
Diversification Opportunities for Dell Technologies and Leidos Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dell and Leidos is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings and Dell Technologies 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 Dell Technologies are associated (or correlated) with Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of Dell Technologies i.e., Dell Technologies and Leidos Holdings go up and down completely randomly.
Pair Corralation between Dell Technologies and Leidos Holdings
Assuming the 90 days trading horizon Dell Technologies is expected to generate 1.95 times more return on investment than Leidos Holdings. However, Dell Technologies is 1.95 times more volatile than Leidos Holdings. It trades about 0.09 of its potential returns per unit of risk. Leidos Holdings is currently generating about 0.14 per unit of risk. If you would invest 35,224 in Dell Technologies on September 14, 2024 and sell it today you would earn a total of 36,302 from holding Dell Technologies or generate 103.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.35% |
| Values | Daily Returns |
Dell Technologies vs. Leidos Holdings
Performance |
| Timeline |
| Dell Technologies |
| Leidos Holdings |
Dell Technologies and Leidos Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dell Technologies and Leidos Holdings
The main advantage of trading using opposite Dell Technologies and Leidos Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies position performs unexpectedly, Leidos Holdings 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 Leidos Holdings will offset losses from the drop in Leidos Holdings' long position.| Dell Technologies vs. Metalrgica Riosulense SA | Dell Technologies vs. Nordon Indstrias Metalrgicas | Dell Technologies vs. Unifique Telecomunicaes SA | Dell Technologies vs. HDFC Bank Limited |
| Leidos Holdings vs. Micron Technology | Leidos Holdings vs. Technos SA | Leidos Holdings vs. Unifique Telecomunicaes SA | Leidos Holdings vs. Verizon Communications |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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