Correlation Between NETGEAR and PacifiCorp

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

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

Diversification Opportunities for NETGEAR and PacifiCorp

0.53

Correlation Coefficient

NETGEAR  PacifiCorp

Very weak diversification

The 3 months correlation between NETGEAR and PacifiCorp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of NETGEAR i.e., NETGEAR and PacifiCorp go up and down completely randomly.

Pair Corralation between NETGEAR and PacifiCorp

Given the investment horizon of 90 days NETGEAR is expected to generate 0.08 times more return on investment than PacifiCorp. However, NETGEAR is 12.92 times less risky than PacifiCorp. It trades about -0.07 of its potential returns per unit of risk. PacifiCorp is currently generating about -0.16 per unit of risk. If you would invest  2,719  in NETGEAR on December 22, 2024 and sell it today you would lose (356.00) from holding NETGEAR or give up 13.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	21.67%
Values	Daily Returns

NETGEAR  vs.  PacifiCorp

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 latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

PacifiCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PacifiCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NETGEAR and PacifiCorp

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

The idea behind NETGEAR and PacifiCorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.