Correlation Between NETGEAR and RadNet

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

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

Diversification Opportunities for NETGEAR and RadNet

0.09

Correlation Coefficient

NETGEAR  RadNet

Significant diversification

The 3 months correlation between NETGEAR and RadNet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of NETGEAR i.e., NETGEAR and RadNet go up and down completely randomly.

Pair Corralation between NETGEAR and RadNet

Given the investment horizon of 90 days NETGEAR is expected to generate 0.64 times more return on investment than RadNet. However, NETGEAR is 1.55 times less risky than RadNet. It trades about -0.09 of its potential returns per unit of risk. RadNet Inc is currently generating about -0.27 per unit of risk. If you would invest  2,903  in NETGEAR on October 26, 2024 and sell it today you would lose (82.00) from holding NETGEAR or give up 2.82% of portfolio value over 90 days.

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

NETGEAR  vs.  RadNet Inc

NETGEAR

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

RadNet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RadNet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RadNet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NETGEAR and RadNet

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

The idea behind NETGEAR and RadNet 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.