Correlation Between Dell Technologies and Pure Storage

Can any of the company-specific risk be diversified away by investing in both Dell Technologies and Pure Storage 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 Pure Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dell Technologies and Pure Storage, you can compare the effects of market volatilities on Dell Technologies and Pure Storage 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 Pure Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Pure Storage.

Diversification Opportunities for Dell Technologies and Pure Storage

0.1

Correlation Coefficient

Dell Technologies  Pure Storage

Average diversification

The 3 months correlation between Dell and Pure is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Dell Technologies i.e., Dell Technologies and Pure Storage go up and down completely randomly.

Pair Corralation between Dell Technologies and Pure Storage

Given the investment horizon of 90 days Dell Technologies is expected to generate 1.5 times more return on investment than Pure Storage. However, Dell Technologies is 1.5 times more volatile than Pure Storage. It trades about 0.08 of its potential returns per unit of risk. Pure Storage is currently generating about 0.01 per unit of risk. If you would invest  9,363  in Dell Technologies on August 27, 2024 and sell it today you would earn a total of  5,058  from holding Dell Technologies or generate 54.02% return on investment over 90 days.

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

Dell Technologies  vs.  Pure Storage

Dell Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pure Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pure Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dell Technologies and Pure Storage

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

The idea behind Dell Technologies and Pure Storage 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.