Correlation Between NETGEAR and MEDIFAST INC

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

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

Diversification Opportunities for NETGEAR and MEDIFAST INC

0.24

Correlation Coefficient

NETGEAR  MEDIFAST INC

Modest diversification

The 3 months correlation between NETGEAR and MEDIFAST is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC 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 MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of NETGEAR i.e., NETGEAR and MEDIFAST INC go up and down completely randomly.

Pair Corralation between NETGEAR and MEDIFAST INC

Given the investment horizon of 90 days NETGEAR is expected to generate 1.0 times more return on investment than MEDIFAST INC. However, NETGEAR is 1.0 times more volatile than MEDIFAST INC. It trades about -0.07 of its potential returns per unit of risk. MEDIFAST INC is currently generating about -0.09 per unit of risk. If you would invest  2,800  in NETGEAR on December 20, 2024 and sell it today you would lose (381.00) from holding NETGEAR or give up 13.61% of portfolio value over 90 days.

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

NETGEAR  vs.  MEDIFAST INC

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

MEDIFAST INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days MEDIFAST INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NETGEAR and MEDIFAST INC

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

The idea behind NETGEAR and MEDIFAST INC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.