Correlation Between NETGEAR and Arhaus

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

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

Diversification Opportunities for NETGEAR and Arhaus

-0.39

Correlation Coefficient

NETGEAR  Arhaus

Very good diversification

The 3 months correlation between NETGEAR and Arhaus is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc 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 Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of NETGEAR i.e., NETGEAR and Arhaus go up and down completely randomly.

Pair Corralation between NETGEAR and Arhaus

Given the investment horizon of 90 days NETGEAR is expected to generate 0.84 times more return on investment than Arhaus. However, NETGEAR is 1.19 times less risky than Arhaus. It trades about 0.03 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.03 per unit of risk. If you would invest  1,917  in NETGEAR on September 5, 2024 and sell it today you would earn a total of  634.00  from holding NETGEAR or generate 33.07% return on investment over 90 days.

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

NETGEAR  vs.  Arhaus Inc

NETGEAR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 14 (%) 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.

Arhaus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arhaus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Arhaus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NETGEAR and Arhaus

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

The idea behind NETGEAR and Arhaus 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.