Correlation Between NETGEAR and Hanover Foods

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

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

Diversification Opportunities for NETGEAR and Hanover Foods

-0.37

Correlation Coefficient

NETGEAR  Hanover Foods

Very good diversification

The 3 months correlation between NETGEAR and Hanover is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of NETGEAR i.e., NETGEAR and Hanover Foods go up and down completely randomly.

Pair Corralation between NETGEAR and Hanover Foods

Given the investment horizon of 90 days NETGEAR is expected to generate 1.44 times more return on investment than Hanover Foods. However, NETGEAR is 1.44 times more volatile than Hanover Foods. It trades about 0.15 of its potential returns per unit of risk. Hanover Foods is currently generating about -0.22 per unit of risk. If you would invest  2,523  in NETGEAR on October 12, 2024 and sell it today you would earn a total of  172.00  from holding NETGEAR or generate 6.82% return on investment over 90 days.

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

NETGEAR  vs.  Hanover Foods

NETGEAR

Risk-Adjusted Performance

16 of 100

Good

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.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NETGEAR and Hanover Foods

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

The idea behind NETGEAR and Hanover Foods 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.