Correlation Between NETGEAR and DigiCom Berhad

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

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

Diversification Opportunities for NETGEAR and DigiCom Berhad

0.72

Correlation Coefficient

NETGEAR  DigiCom Berhad

Poor diversification

The 3 months correlation between NETGEAR and DigiCom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and DigiCom Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiCom Berhad 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 DigiCom Berhad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiCom Berhad has no effect on the direction of NETGEAR i.e., NETGEAR and DigiCom Berhad go up and down completely randomly.

Pair Corralation between NETGEAR and DigiCom Berhad

If you would invest  2,410  in NETGEAR on September 21, 2024 and sell it today you would earn a total of  390.00  from holding NETGEAR or generate 16.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

NETGEAR  vs.  DigiCom Berhad

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

DigiCom Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigiCom Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, DigiCom Berhad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NETGEAR and DigiCom Berhad

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

The idea behind NETGEAR and DigiCom Berhad 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.