Correlation Between NETGEAR and Globalfoundries

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

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

Diversification Opportunities for NETGEAR and Globalfoundries

0.7

Correlation Coefficient

NETGEAR  Globalfoundries

Poor diversification

The 3 months correlation between NETGEAR and Globalfoundries is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of NETGEAR i.e., NETGEAR and Globalfoundries go up and down completely randomly.

Pair Corralation between NETGEAR and Globalfoundries

Given the investment horizon of 90 days NETGEAR is expected to generate 0.59 times more return on investment than Globalfoundries. However, NETGEAR is 1.71 times less risky than Globalfoundries. It trades about 0.35 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.08 per unit of risk. If you would invest  2,042  in NETGEAR on September 27, 2024 and sell it today you would earn a total of  797.00  from holding NETGEAR or generate 39.03% return on investment over 90 days.

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

NETGEAR  vs.  Globalfoundries

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) 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.

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NETGEAR and Globalfoundries

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

The idea behind NETGEAR and Globalfoundries 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.