Correlation Between NETGEAR and AXT

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Can any of the company-specific risk be diversified away by investing in both NETGEAR and AXT 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 AXT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and AXT Inc, you can compare the effects of market volatilities on NETGEAR and AXT 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 AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and AXT.

Diversification Opportunities for NETGEAR and AXT

NETGEARAXTDiversified AwayNETGEARAXTDiversified Away100%
-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NETGEAR and AXT is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of NETGEAR i.e., NETGEAR and AXT go up and down completely randomly.

Pair Corralation between NETGEAR and AXT

Given the investment horizon of 90 days NETGEAR is expected to generate 0.51 times more return on investment than AXT. However, NETGEAR is 1.97 times less risky than AXT. It trades about 0.25 of its potential returns per unit of risk. AXT Inc is currently generating about -0.01 per unit of risk. If you would invest  1,927  in NETGEAR on October 7, 2024 and sell it today you would earn a total of  825.00  from holding NETGEAR or generate 42.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NETGEAR  vs.  AXT Inc

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-10010203040
JavaScript chart by amCharts 3.21.15NTGR AXTI
       Timeline  
NETGEAR 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan20222426283032
AXT Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AXT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, AXT is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1.822.22.42.62.83

NETGEAR and AXT Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.33-5.49-3.65-1.810.01.953.996.048.0910.14 0.020.030.040.050.06
JavaScript chart by amCharts 3.21.15NTGR AXTI
       Returns  

Pair Trading with NETGEAR and AXT

The main advantage of trading using opposite NETGEAR and AXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, AXT 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 AXT will offset losses from the drop in AXT's long position.
The idea behind NETGEAR and AXT 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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