Correlation Between Casio Computer and NETGEAR

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

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

Diversification Opportunities for Casio Computer and NETGEAR

-0.25

Correlation Coefficient

Casio Computer  NETGEAR

Very good diversification

The 3 months correlation between Casio and NETGEAR is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer Co and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Casio Computer 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 Casio Computer 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 Casio Computer i.e., Casio Computer and NETGEAR go up and down completely randomly.

Pair Corralation between Casio Computer and NETGEAR

Assuming the 90 days horizon Casio Computer is expected to generate 5.65 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Casio Computer Co is 1.2 times less risky than NETGEAR. It trades about 0.01 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  1,754  in NETGEAR on September 18, 2024 and sell it today you would earn a total of  826.00  from holding NETGEAR or generate 47.09% return on investment over 90 days.

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

Casio Computer Co  vs.  NETGEAR

Casio Computer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NETGEAR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Casio Computer and NETGEAR

The main advantage of trading using opposite Casio Computer and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.