Correlation Between Jabil Circuit and NETGEAR

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

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

Diversification Opportunities for Jabil Circuit and NETGEAR

0.77

Correlation Coefficient

Jabil Circuit  NETGEAR

Poor diversification

The 3 months correlation between Jabil and NETGEAR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Jabil Circuit and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Jabil Circuit 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 Jabil Circuit 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 Jabil Circuit i.e., Jabil Circuit and NETGEAR go up and down completely randomly.

Pair Corralation between Jabil Circuit and NETGEAR

Considering the 90-day investment horizon Jabil Circuit is expected to generate 0.9 times more return on investment than NETGEAR. However, Jabil Circuit is 1.11 times less risky than NETGEAR. It trades about 0.18 of its potential returns per unit of risk. NETGEAR is currently generating about 0.11 per unit of risk. If you would invest  10,583  in Jabil Circuit on September 13, 2024 and sell it today you would earn a total of  2,692  from holding Jabil Circuit or generate 25.44% return on investment over 90 days.

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

Jabil Circuit  vs.  NETGEAR

Jabil Circuit

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Jabil Circuit disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 Jabil Circuit and NETGEAR

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