Correlation Between Cairo Communication and NetApp

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

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

Diversification Opportunities for Cairo Communication and NetApp

0.59

Correlation Coefficient

Cairo Communication  NetApp

Very weak diversification

The 3 months correlation between Cairo and NetApp is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Cairo Communication 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 Cairo Communication SpA are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Cairo Communication i.e., Cairo Communication and NetApp go up and down completely randomly.

Pair Corralation between Cairo Communication and NetApp

Assuming the 90 days trading horizon Cairo Communication is expected to generate 1.22 times less return on investment than NetApp. But when comparing it to its historical volatility, Cairo Communication SpA is 1.15 times less risky than NetApp. It trades about 0.07 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,226  in NetApp Inc on October 9, 2024 and sell it today you would earn a total of  5,952  from holding NetApp Inc or generate 113.89% return on investment over 90 days.

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

Cairo Communication SpA  vs.  NetApp Inc

Cairo Communication SpA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cairo Communication may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NetApp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetApp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NetApp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cairo Communication and NetApp

The main advantage of trading using opposite Cairo Communication and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.

The idea behind Cairo Communication SpA and NetApp Inc 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.