Correlation Between NETGEAR and Huadi International

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

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

Diversification Opportunities for NETGEAR and Huadi International

-0.77

Correlation Coefficient

NETGEAR  Huadi International

Pay attention - limited upside

The 3 months correlation between NETGEAR and Huadi is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Huadi International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadi International 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 Huadi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadi International has no effect on the direction of NETGEAR i.e., NETGEAR and Huadi International go up and down completely randomly.

Pair Corralation between NETGEAR and Huadi International

Given the investment horizon of 90 days NETGEAR is expected to generate 0.69 times more return on investment than Huadi International. However, NETGEAR is 1.45 times less risky than Huadi International. It trades about 0.1 of its potential returns per unit of risk. Huadi International Group is currently generating about -0.03 per unit of risk. If you would invest  1,291  in NETGEAR on September 21, 2024 and sell it today you would earn a total of  1,380  from holding NETGEAR or generate 106.89% return on investment over 90 days.

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

NETGEAR  vs.  Huadi International Group

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.

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with NETGEAR and Huadi International

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

The idea behind NETGEAR and Huadi International Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.