Correlation Between NETGEAR and Afya

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

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

Diversification Opportunities for NETGEAR and Afya

-0.52

Correlation Coefficient

NETGEAR  Afya

Excellent diversification

The 3 months correlation between NETGEAR and Afya is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and NETGEAR 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 NETGEAR are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of NETGEAR i.e., NETGEAR and Afya go up and down completely randomly.

Pair Corralation between NETGEAR and Afya

Given the investment horizon of 90 days NETGEAR is expected to generate 1.06 times more return on investment than Afya. However, NETGEAR is 1.06 times more volatile than Afya. It trades about 0.18 of its potential returns per unit of risk. Afya is currently generating about -0.19 per unit of risk. If you would invest  2,349  in NETGEAR on October 7, 2024 and sell it today you would earn a total of  403.00  from holding NETGEAR or generate 17.16% return on investment over 90 days.

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

NETGEAR  vs.  Afya

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.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NETGEAR and Afya

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

The idea behind NETGEAR and Afya 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.