Correlation Between AKITA Drilling and NETGEAR

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

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

Diversification Opportunities for AKITA Drilling and NETGEAR

0.67

Correlation Coefficient

AKITA Drilling  NETGEAR

Poor diversification

The 3 months correlation between AKITA and NETGEAR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and AKITA Drilling 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 AKITA Drilling are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and NETGEAR go up and down completely randomly.

Pair Corralation between AKITA Drilling and NETGEAR

Assuming the 90 days horizon AKITA Drilling is expected to generate 3.76 times less return on investment than NETGEAR. In addition to that, AKITA Drilling is 1.05 times more volatile than NETGEAR. It trades about 0.01 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.03 per unit of volatility. If you would invest  2,082  in NETGEAR on September 2, 2024 and sell it today you would earn a total of  378.00  from holding NETGEAR or generate 18.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

AKITA Drilling  vs.  NETGEAR

AKITA Drilling

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AKITA Drilling may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKITA Drilling and NETGEAR

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

The idea behind AKITA Drilling and NETGEAR 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.