Correlation Between MYR and NETGEAR

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

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

Diversification Opportunities for MYR and NETGEAR

0.84

Correlation Coefficient

MYR  NETGEAR

Very poor diversification

The 3 months correlation between MYR and NETGEAR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and MYR 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 MYR Group 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 MYR i.e., MYR and NETGEAR go up and down completely randomly.

Pair Corralation between MYR and NETGEAR

Given the investment horizon of 90 days MYR Group is expected to under-perform the NETGEAR. In addition to that, MYR is 1.05 times more volatile than NETGEAR. It trades about -0.23 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.27 per unit of volatility. If you would invest  2,417  in NETGEAR on October 10, 2024 and sell it today you would earn a total of  316.00  from holding NETGEAR or generate 13.07% return on investment over 90 days.

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

MYR Group  vs.  NETGEAR

MYR Group

Risk-Adjusted Performance

9 of 100

OK

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

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MYR and NETGEAR

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

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.