Correlation Between NETGEAR and Sellas Life

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

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

Diversification Opportunities for NETGEAR and Sellas Life

-0.4

Correlation Coefficient

NETGEAR  Sellas Life

Very good diversification

The 3 months correlation between NETGEAR and Sellas is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Sellas Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sellas Life Sciences 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 Sellas Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sellas Life Sciences has no effect on the direction of NETGEAR i.e., NETGEAR and Sellas Life go up and down completely randomly.

Pair Corralation between NETGEAR and Sellas Life

Given the investment horizon of 90 days NETGEAR is expected to generate 0.5 times more return on investment than Sellas Life. However, NETGEAR is 2.0 times less risky than Sellas Life. It trades about 0.13 of its potential returns per unit of risk. Sellas Life Sciences is currently generating about -0.44 per unit of risk. If you would invest  2,415  in NETGEAR on September 15, 2024 and sell it today you would earn a total of  126.00  from holding NETGEAR or generate 5.22% return on investment over 90 days.

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

NETGEAR  vs.  Sellas Life Sciences

NETGEAR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 10 (%) 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.

Sellas Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sellas Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NETGEAR and Sellas Life

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

The idea behind NETGEAR and Sellas Life Sciences 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.