Correlation Between Capital Income and NETGEAR

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

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

Diversification Opportunities for Capital Income and NETGEAR

-0.41

Correlation Coefficient

Capital Income  NETGEAR

Very good diversification

The 3 months correlation between Capital and NETGEAR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Capital Income 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 Capital Income Builder 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 Capital Income i.e., Capital Income and NETGEAR go up and down completely randomly.

Pair Corralation between Capital Income and NETGEAR

Assuming the 90 days horizon Capital Income Builder is expected to generate 0.2 times more return on investment than NETGEAR. However, Capital Income Builder is 4.96 times less risky than NETGEAR. It trades about 0.14 of its potential returns per unit of risk. NETGEAR is currently generating about -0.06 per unit of risk. If you would invest  6,853  in Capital Income Builder on December 30, 2024 and sell it today you would earn a total of  324.00  from holding Capital Income Builder or generate 4.73% return on investment over 90 days.

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

Capital Income Builder  vs.  NETGEAR

Capital Income Builder

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Capital Income and NETGEAR

The main advantage of trading using opposite Capital Income and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income 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 Capital Income Builder 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.