Correlation Between FIREWEED METALS and NetApp

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

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

Diversification Opportunities for FIREWEED METALS and NetApp

0.22

Correlation Coefficient

FIREWEED METALS  NetApp

Modest diversification

The 3 months correlation between FIREWEED and NetApp is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and FIREWEED METALS 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 FIREWEED METALS P are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and NetApp go up and down completely randomly.

Pair Corralation between FIREWEED METALS and NetApp

Assuming the 90 days horizon FIREWEED METALS is expected to generate 1.5 times less return on investment than NetApp. But when comparing it to its historical volatility, FIREWEED METALS P is 1.02 times less risky than NetApp. It trades about 0.12 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,978  in NetApp Inc on September 18, 2024 and sell it today you would earn a total of  1,230  from holding NetApp Inc or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

FIREWEED METALS P  vs.  NetApp Inc

FIREWEED METALS P

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIREWEED METALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NetApp Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FIREWEED METALS and NetApp

The main advantage of trading using opposite FIREWEED METALS and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.

The idea behind FIREWEED METALS P and NetApp Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.