Correlation Between Coda Octopus and NETGEAR

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

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

Diversification Opportunities for Coda Octopus and NETGEAR

-0.6

Correlation Coefficient

Coda Octopus  NETGEAR

Excellent diversification

The 3 months correlation between Coda and NETGEAR is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Coda Octopus Group and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Coda Octopus 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 Coda Octopus Group 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 Coda Octopus i.e., Coda Octopus and NETGEAR go up and down completely randomly.

Pair Corralation between Coda Octopus and NETGEAR

Given the investment horizon of 90 days Coda Octopus is expected to generate 1.68 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Coda Octopus Group is 1.14 times less risky than NETGEAR. It trades about 0.03 of its potential returns per unit of risk. NETGEAR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,766  in NETGEAR on December 4, 2024 and sell it today you would earn a total of  721.00  from holding NETGEAR or generate 40.83% return on investment over 90 days.

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

Coda Octopus Group  vs.  NETGEAR

Coda Octopus Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coda Octopus Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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 relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Coda Octopus and NETGEAR

The main advantage of trading using opposite Coda Octopus and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coda Octopus 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 Coda Octopus Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.