Correlation Between NETGEAR and East Resources

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

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

Diversification Opportunities for NETGEAR and East Resources

0.41

Correlation Coefficient

NETGEAR  East Resources

Very weak diversification

The 3 months correlation between NETGEAR and East is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and East Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Resources Acqui 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 East Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Resources Acqui has no effect on the direction of NETGEAR i.e., NETGEAR and East Resources go up and down completely randomly.

Pair Corralation between NETGEAR and East Resources

If you would invest  2,460  in NETGEAR on September 29, 2024 and sell it today you would earn a total of  354.00  from holding NETGEAR or generate 14.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

NETGEAR  vs.  East Resources Acquisition

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 unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

East Resources Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NETGEAR and East Resources

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

The idea behind NETGEAR and East Resources Acquisition 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.