Correlation Between Mid-Atlantic Home and NETGEAR

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

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

Diversification Opportunities for Mid-Atlantic Home and NETGEAR

0.0

Correlation Coefficient

Mid-Atlantic Home  NETGEAR

Pay attention - limited upside

The 3 months correlation between Mid-Atlantic and NETGEAR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mid Atlantic Home Health and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Mid-Atlantic Home 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 Mid Atlantic Home Health 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 Mid-Atlantic Home i.e., Mid-Atlantic Home and NETGEAR go up and down completely randomly.

Pair Corralation between Mid-Atlantic Home and NETGEAR

Given the investment horizon of 90 days Mid Atlantic Home Health is expected to under-perform the NETGEAR. In addition to that, Mid-Atlantic Home is 1.66 times more volatile than NETGEAR. It trades about -0.06 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.03 per unit of volatility. If you would invest  2,046  in NETGEAR on October 4, 2024 and sell it today you would earn a total of  669.00  from holding NETGEAR or generate 32.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Mid Atlantic Home Health  vs.  NETGEAR

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid-Atlantic Home is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) 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 Mid-Atlantic Home and NETGEAR

The main advantage of trading using opposite Mid-Atlantic Home and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-Atlantic Home 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 Mid Atlantic Home Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.