Correlation Between NETGEAR and EXPEDIA

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

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

Diversification Opportunities for NETGEAR and EXPEDIA

-0.53

Correlation Coefficient

NETGEAR  EXPEDIA

Excellent diversification

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

Pair Corralation between NETGEAR and EXPEDIA

Given the investment horizon of 90 days NETGEAR is expected to generate 5.83 times more return on investment than EXPEDIA. However, NETGEAR is 5.83 times more volatile than EXPEDIA GROUP INC. It trades about 0.13 of its potential returns per unit of risk. EXPEDIA GROUP INC is currently generating about -0.13 per unit of risk. If you would invest  2,136  in NETGEAR on September 15, 2024 and sell it today you would earn a total of  405.00  from holding NETGEAR or generate 18.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

NETGEAR  vs.  EXPEDIA GROUP INC

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.

EXPEDIA GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXPEDIA GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EXPEDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NETGEAR and EXPEDIA

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

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