Correlation Between Lake Resources and NETGEAR

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

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

Diversification Opportunities for Lake Resources and NETGEAR

0.29

Correlation Coefficient

Lake Resources  NETGEAR

Modest diversification

The 3 months correlation between Lake and NETGEAR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Lake Resources 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 Lake Resources NL 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 Lake Resources i.e., Lake Resources and NETGEAR go up and down completely randomly.

Pair Corralation between Lake Resources and NETGEAR

Assuming the 90 days horizon Lake Resources NL is expected to under-perform the NETGEAR. In addition to that, Lake Resources is 3.73 times more volatile than NETGEAR. It trades about -0.31 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.22 per unit of volatility. If you would invest  2,317  in NETGEAR on September 5, 2024 and sell it today you would earn a total of  215.00  from holding NETGEAR or generate 9.28% return on investment over 90 days.

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

Lake Resources NL  vs.  NETGEAR

Lake Resources NL

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Lake Resources reported solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Resources and NETGEAR

The main advantage of trading using opposite Lake Resources and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources 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 Lake Resources NL 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.