Correlation Between CommScope Holding and NETGEAR

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

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

Diversification Opportunities for CommScope Holding and NETGEAR

0.14

Correlation Coefficient

CommScope Holding  NETGEAR

Average diversification

The 3 months correlation between CommScope and NETGEAR is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CommScope Holding Co and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and CommScope Holding 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 CommScope Holding 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 CommScope Holding i.e., CommScope Holding and NETGEAR go up and down completely randomly.

Pair Corralation between CommScope Holding and NETGEAR

Given the investment horizon of 90 days CommScope Holding is expected to generate 1.25 times less return on investment than NETGEAR. In addition to that, CommScope Holding is 1.2 times more volatile than NETGEAR. It trades about 0.1 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.16 per unit of volatility. If you would invest  1,632  in NETGEAR on August 31, 2024 and sell it today you would earn a total of  772.00  from holding NETGEAR or generate 47.3% return on investment over 90 days.

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

CommScope Holding Co  vs.  NETGEAR

CommScope Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CommScope Holding Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, CommScope Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) 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 CommScope Holding and NETGEAR

The main advantage of trading using opposite CommScope Holding and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CommScope Holding 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 CommScope Holding 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.