Correlation Between Broadleaf and NETGEAR

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

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

Diversification Opportunities for Broadleaf and NETGEAR

0.51

Correlation Coefficient

Broadleaf  NETGEAR

Very weak diversification

The 3 months correlation between Broadleaf and NETGEAR is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Broadleaf Co and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Broadleaf 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 Broadleaf Co 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 Broadleaf i.e., Broadleaf and NETGEAR go up and down completely randomly.

Pair Corralation between Broadleaf and NETGEAR

Assuming the 90 days horizon Broadleaf is expected to generate 1.35 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Broadleaf Co is 43.41 times less risky than NETGEAR. It trades about 0.23 of its potential returns per unit of risk. NETGEAR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,719  in NETGEAR on October 22, 2024 and sell it today you would lose (2.00) from holding NETGEAR or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Broadleaf Co  vs.  NETGEAR

Broadleaf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadleaf Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Broadleaf is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

NETGEAR

Risk-Adjusted Performance

16 of 100

Good

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 Broadleaf and NETGEAR

The main advantage of trading using opposite Broadleaf and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadleaf 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 Broadleaf Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.