Correlation Between NETGEAR and NVIDIA

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

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

Diversification Opportunities for NETGEAR and NVIDIA

-0.37

Correlation Coefficient

NETGEAR  NVIDIA

Very good diversification

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

Pair Corralation between NETGEAR and NVIDIA

Given the investment horizon of 90 days NETGEAR is expected to generate 0.71 times more return on investment than NVIDIA. However, NETGEAR is 1.42 times less risky than NVIDIA. It trades about 0.04 of its potential returns per unit of risk. NVIDIA is currently generating about -0.01 per unit of risk. If you would invest  2,460  in NETGEAR on November 28, 2024 and sell it today you would earn a total of  85.00  from holding NETGEAR or generate 3.46% return on investment over 90 days.

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

NETGEAR  vs.  NVIDIA

NETGEAR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NETGEAR and NVIDIA

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

The idea behind NETGEAR and NVIDIA 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.