Correlation Between Auna SA and NETGEAR

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

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

Diversification Opportunities for Auna SA and NETGEAR

-0.21

Correlation Coefficient

Auna SA  NETGEAR

Very good diversification

The 3 months correlation between Auna and NETGEAR is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Auna SA and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Auna SA 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 Auna SA 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 Auna SA i.e., Auna SA and NETGEAR go up and down completely randomly.

Pair Corralation between Auna SA and NETGEAR

Given the investment horizon of 90 days Auna SA is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Auna SA is 1.3 times less risky than NETGEAR. The stock trades about -0.05 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,208  in NETGEAR on October 9, 2024 and sell it today you would earn a total of  1,537  from holding NETGEAR or generate 127.24% return on investment over 90 days.

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

Auna SA  vs.  NETGEAR

Auna SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auna SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Auna SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auna SA and NETGEAR

The main advantage of trading using opposite Auna SA and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auna SA 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 Auna SA 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.