Correlation Between NETGEAR and Kontoor Brands

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

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

Diversification Opportunities for NETGEAR and Kontoor Brands

0.55

Correlation Coefficient

NETGEAR  Kontoor Brands

Very weak diversification

The 3 months correlation between NETGEAR and Kontoor is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands 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 Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of NETGEAR i.e., NETGEAR and Kontoor Brands go up and down completely randomly.

Pair Corralation between NETGEAR and Kontoor Brands

Given the investment horizon of 90 days NETGEAR is expected to generate 1.76 times more return on investment than Kontoor Brands. However, NETGEAR is 1.76 times more volatile than Kontoor Brands. It trades about 0.01 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.03 per unit of risk. If you would invest  2,719  in NETGEAR on October 23, 2024 and sell it today you would lose (2.00) from holding NETGEAR or give up 0.07% of portfolio value over 90 days.

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

NETGEAR  vs.  Kontoor Brands

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

Kontoor Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and Kontoor Brands

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

The idea behind NETGEAR and Kontoor Brands 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..