The way this idea got started was I went to a seminar run by a couple Oppenheimer whiz kids who manage about a gazillion dollars using O'Neil's Canslim approach (Investors' Business Daily). The focus of discussion truned to Seagate (STX) and Western Digital (WDC), who between them control over 85% of the disk drive business. Toshiba has a minor role in the business but these 2 have a virtually lock on the industry. Whether they collude on pricing within this almost monopolistic milieu is subject to speculation but they seldom get far afield from one another. I decided to take a look using the MO2 pairs analysis.
This is an unusual pair, to be sure, but it provides a sweet niche trade most traders never discover.
I'll continue to track this pair as part of the ongoing work in progress on the pair trading portfolio.