Correlation Between Ardelyx and NETGEAR

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

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

Diversification Opportunities for Ardelyx and NETGEAR

-0.78

Correlation Coefficient

Ardelyx  NETGEAR

Pay attention - limited upside

The 3 months correlation between Ardelyx and NETGEAR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ardelyx and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Ardelyx 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 Ardelyx 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 Ardelyx i.e., Ardelyx and NETGEAR go up and down completely randomly.

Pair Corralation between Ardelyx and NETGEAR

Given the investment horizon of 90 days Ardelyx is expected to under-perform the NETGEAR. In addition to that, Ardelyx is 1.75 times more volatile than NETGEAR. It trades about -0.11 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.3 per unit of volatility. If you would invest  2,431  in NETGEAR on September 24, 2024 and sell it today you would earn a total of  369.00  from holding NETGEAR or generate 15.18% return on investment over 90 days.

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

Ardelyx  vs.  NETGEAR

Ardelyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardelyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NETGEAR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardelyx and NETGEAR

The main advantage of trading using opposite Ardelyx and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardelyx 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 Ardelyx 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.