Correlation Between NETGEAR and Summit Therapeutics

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

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

Diversification Opportunities for NETGEAR and Summit Therapeutics

-0.57

Correlation Coefficient

NETGEAR  Summit Therapeutics

Excellent diversification

The 3 months correlation between NETGEAR and Summit is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Summit Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Therapeutics 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 Summit Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Therapeutics PLC has no effect on the direction of NETGEAR i.e., NETGEAR and Summit Therapeutics go up and down completely randomly.

Pair Corralation between NETGEAR and Summit Therapeutics

Given the investment horizon of 90 days NETGEAR is expected to generate 0.62 times more return on investment than Summit Therapeutics. However, NETGEAR is 1.61 times less risky than Summit Therapeutics. It trades about 0.3 of its potential returns per unit of risk. Summit Therapeutics PLC is currently generating about -0.06 per unit of risk. If you would invest  2,431  in NETGEAR on September 24, 2024 and sell it today you would earn a total of  369.00  from holding NETGEAR or generate 15.18% 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.  Summit Therapeutics PLC

NETGEAR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary 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 Summit Therapeutics

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

The idea behind NETGEAR and Summit Therapeutics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.