Correlation Between NETGEAR and China Southern

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

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

Diversification Opportunities for NETGEAR and China Southern

0.34

Correlation Coefficient

NETGEAR  China Southern

Weak diversification

The 3 months correlation between NETGEAR and China is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of NETGEAR i.e., NETGEAR and China Southern go up and down completely randomly.

Pair Corralation between NETGEAR and China Southern

Given the investment horizon of 90 days NETGEAR is expected to generate 1.21 times more return on investment than China Southern. However, NETGEAR is 1.21 times more volatile than China Southern Airlines. It trades about -0.07 of its potential returns per unit of risk. China Southern Airlines is currently generating about -0.18 per unit of risk. If you would invest  2,719  in NETGEAR on December 22, 2024 and sell it today you would lose (356.00) from holding NETGEAR or give up 13.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

NETGEAR  vs.  China Southern Airlines

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

China Southern Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Southern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NETGEAR and China Southern

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

The idea behind NETGEAR and China Southern Airlines 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.