Correlation Between NETGEAR and CenterPoint Energy

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

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

Diversification Opportunities for NETGEAR and CenterPoint Energy

-0.71

Correlation Coefficient

NETGEAR  CenterPoint Energy

Pay attention - limited upside

The 3 months correlation between NETGEAR and CenterPoint is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of NETGEAR i.e., NETGEAR and CenterPoint Energy go up and down completely randomly.

Pair Corralation between NETGEAR and CenterPoint Energy

Given the investment horizon of 90 days NETGEAR is expected to under-perform the CenterPoint Energy. In addition to that, NETGEAR is 2.39 times more volatile than CenterPoint Energy. It trades about -0.06 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.2 per unit of volatility. If you would invest  3,162  in CenterPoint Energy on December 30, 2024 and sell it today you would earn a total of  463.00  from holding CenterPoint Energy or generate 14.64% return on investment over 90 days.

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

NETGEAR  vs.  CenterPoint Energy

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.

CenterPoint Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and CenterPoint Energy

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

The idea behind NETGEAR and CenterPoint Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.