Correlation Between Montauk Renewables and NETGEAR

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

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

Diversification Opportunities for Montauk Renewables and NETGEAR

-0.8

Correlation Coefficient

Montauk Renewables  NETGEAR

Pay attention - limited upside

The 3 months correlation between Montauk and NETGEAR is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and NETGEAR go up and down completely randomly.

Pair Corralation between Montauk Renewables and NETGEAR

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the NETGEAR. In addition to that, Montauk Renewables is 1.15 times more volatile than NETGEAR. It trades about -0.29 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.3 per unit of volatility. If you would invest  2,431  in NETGEAR on September 25, 2024 and sell it today you would earn a total of  369.00  from holding NETGEAR or generate 15.18% return on investment over 90 days.

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

Montauk Renewables  vs.  NETGEAR

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NETGEAR

Risk-Adjusted Performance

18 of 100

Good

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 Montauk Renewables and NETGEAR

The main advantage of trading using opposite Montauk Renewables and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.