Correlation Between Barings BDC and NETGEAR

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

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

Diversification Opportunities for Barings BDC and NETGEAR

0.32

Correlation Coefficient

Barings BDC  NETGEAR

Weak diversification

The 3 months correlation between Barings and NETGEAR is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and NETGEAR go up and down completely randomly.

Pair Corralation between Barings BDC and NETGEAR

Given the investment horizon of 90 days Barings BDC is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Barings BDC is 2.31 times less risky than NETGEAR. The stock trades about -0.02 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,077  in NETGEAR on September 24, 2024 and sell it today you would earn a total of  723.00  from holding NETGEAR or generate 34.81% return on investment over 90 days.

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

Barings BDC  vs.  NETGEAR

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Barings BDC and NETGEAR

The main advantage of trading using opposite Barings BDC and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.