Correlation Between NETGEAR and Franklin Wireless

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

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

Diversification Opportunities for NETGEAR and Franklin Wireless

-0.33

Correlation Coefficient

NETGEAR  Franklin Wireless

Very good diversification

The 3 months correlation between NETGEAR and Franklin is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of NETGEAR i.e., NETGEAR and Franklin Wireless go up and down completely randomly.

Pair Corralation between NETGEAR and Franklin Wireless

Given the investment horizon of 90 days NETGEAR is expected to generate 1.22 times more return on investment than Franklin Wireless. However, NETGEAR is 1.22 times more volatile than Franklin Wireless Corp. It trades about 0.32 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.08 per unit of risk. If you would invest  2,410  in NETGEAR on September 21, 2024 and sell it today you would earn a total of  519.50  from holding NETGEAR or generate 21.56% return on investment over 90 days.

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

NETGEAR  vs.  Franklin Wireless Corp

NETGEAR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) 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.

Franklin Wireless Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Wireless Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NETGEAR and Franklin Wireless

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

The idea behind NETGEAR and Franklin Wireless Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.