Correlation Between Aviat Networks and NETGEAR

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

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

Diversification Opportunities for Aviat Networks and NETGEAR

0.23

Correlation Coefficient

Aviat Networks  NETGEAR

Modest diversification

The 3 months correlation between Aviat and NETGEAR is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aviat Networks and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Aviat Networks 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 Aviat Networks 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 Aviat Networks i.e., Aviat Networks and NETGEAR go up and down completely randomly.

Pair Corralation between Aviat Networks and NETGEAR

Given the investment horizon of 90 days Aviat Networks is expected to generate 1.67 times more return on investment than NETGEAR. However, Aviat Networks is 1.67 times more volatile than NETGEAR. It trades about 0.06 of its potential returns per unit of risk. NETGEAR is currently generating about -0.05 per unit of risk. If you would invest  1,749  in Aviat Networks on December 29, 2024 and sell it today you would earn a total of  190.00  from holding Aviat Networks or generate 10.86% return on investment over 90 days.

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

Aviat Networks  vs.  NETGEAR

Aviat Networks

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Aviat Networks showed solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Aviat Networks and NETGEAR

The main advantage of trading using opposite Aviat Networks and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aviat Networks 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 Aviat Networks 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.