Correlation Between NETGEAR and Portmeirion Group

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

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

Diversification Opportunities for NETGEAR and Portmeirion Group

0.8

Correlation Coefficient

NETGEAR  Portmeirion Group

Very poor diversification

The 3 months correlation between NETGEAR and Portmeirion is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Portmeirion Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portmeirion Group PLC 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 Portmeirion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portmeirion Group PLC has no effect on the direction of NETGEAR i.e., NETGEAR and Portmeirion Group go up and down completely randomly.

Pair Corralation between NETGEAR and Portmeirion Group

Given the investment horizon of 90 days NETGEAR is expected to generate 22.71 times more return on investment than Portmeirion Group. However, NETGEAR is 22.71 times more volatile than Portmeirion Group PLC. It trades about 0.15 of its potential returns per unit of risk. Portmeirion Group PLC is currently generating about 0.17 per unit of risk. If you would invest  2,091  in NETGEAR on September 17, 2024 and sell it today you would earn a total of  450.00  from holding NETGEAR or generate 21.52% return on investment over 90 days.

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

NETGEAR  vs.  Portmeirion Group PLC

NETGEAR

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Portmeirion Group PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Portmeirion Group PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Portmeirion Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NETGEAR and Portmeirion Group

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

The idea behind NETGEAR and Portmeirion Group PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.