Correlation Between CN MODERN and NetApp

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

By analyzing existing cross correlation between CN MODERN DAIRY and NetApp Inc, you can compare the effects of market volatilities on CN MODERN and NetApp 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 CN MODERN with a short position of NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and NetApp.

Diversification Opportunities for CN MODERN and NetApp

-0.15

Correlation Coefficient

CN MODERN  NetApp

Good diversification

The 3 months correlation between 07M and NetApp is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of CN MODERN i.e., CN MODERN and NetApp go up and down completely randomly.

Pair Corralation between CN MODERN and NetApp

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 2.05 times more return on investment than NetApp. However, CN MODERN is 2.05 times more volatile than NetApp Inc. It trades about 0.17 of its potential returns per unit of risk. NetApp Inc is currently generating about -0.11 per unit of risk. If you would invest  9.65  in CN MODERN DAIRY on October 5, 2024 and sell it today you would earn a total of  1.35  from holding CN MODERN DAIRY or generate 13.99% return on investment over 90 days.

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

CN MODERN DAIRY  vs.  NetApp Inc

CN MODERN DAIRY

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CN MODERN DAIRY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CN MODERN is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NetApp Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days NetApp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NetApp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CN MODERN and NetApp

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

The idea behind CN MODERN DAIRY and NetApp Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.