Correlation Between NETGEAR and Toro

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

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

Diversification Opportunities for NETGEAR and Toro

0.14

Correlation Coefficient

NETGEAR  Toro

Average diversification

The 3 months correlation between NETGEAR and Toro is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro 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 Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of NETGEAR i.e., NETGEAR and Toro go up and down completely randomly.

Pair Corralation between NETGEAR and Toro

Given the investment horizon of 90 days NETGEAR is expected to generate 1.64 times more return on investment than Toro. However, NETGEAR is 1.64 times more volatile than Toro Co. It trades about 0.3 of its potential returns per unit of risk. Toro Co is currently generating about -0.14 per unit of risk. If you would invest  2,430  in NETGEAR on September 23, 2024 and sell it today you would earn a total of  370.00  from holding NETGEAR or generate 15.23% return on investment over 90 days.

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

NETGEAR  vs.  Toro Co

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) 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.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NETGEAR and Toro

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

The idea behind NETGEAR and Toro Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..