Correlation Between Century Therapeutics and NETGEAR

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

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

Diversification Opportunities for Century Therapeutics and NETGEAR

-0.44

Correlation Coefficient

Century Therapeutics  NETGEAR

Very good diversification

The 3 months correlation between Century and NETGEAR is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Century Therapeutics and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Century Therapeutics 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 Century Therapeutics 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 Century Therapeutics i.e., Century Therapeutics and NETGEAR go up and down completely randomly.

Pair Corralation between Century Therapeutics and NETGEAR

Given the investment horizon of 90 days Century Therapeutics is expected to under-perform the NETGEAR. In addition to that, Century Therapeutics is 1.75 times more volatile than NETGEAR. It trades about -0.01 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.08 per unit of volatility. If you would invest  1,466  in NETGEAR on September 13, 2024 and sell it today you would earn a total of  1,057  from holding NETGEAR or generate 72.1% return on investment over 90 days.

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

Century Therapeutics  vs.  NETGEAR

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NETGEAR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 8 (%) 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 Century Therapeutics and NETGEAR

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