Correlation Between NETGEAR and 502413BE6

Can any of the company-specific risk be diversified away by investing in both NETGEAR and 502413BE6 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 502413BE6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NETGEAR and L3 TECHNOLOGIES INC, you can compare the effects of market volatilities on NETGEAR and 502413BE6 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 502413BE6. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and 502413BE6.

Diversification Opportunities for NETGEAR and 502413BE6

0.4

Correlation Coefficient

NETGEAR  502413BE6

Very weak diversification

The 3 months correlation between NETGEAR and 502413BE6 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and L3 TECHNOLOGIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3 TECHNOLOGIES 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 502413BE6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3 TECHNOLOGIES INC has no effect on the direction of NETGEAR i.e., NETGEAR and 502413BE6 go up and down completely randomly.

Pair Corralation between NETGEAR and 502413BE6

Given the investment horizon of 90 days NETGEAR is expected to generate 1.59 times more return on investment than 502413BE6. However, NETGEAR is 1.59 times more volatile than L3 TECHNOLOGIES INC. It trades about 0.03 of its potential returns per unit of risk. L3 TECHNOLOGIES INC is currently generating about 0.01 per unit of risk. If you would invest  2,055  in NETGEAR on October 23, 2024 and sell it today you would earn a total of  700.00  from holding NETGEAR or generate 34.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.0%
Values	Daily Returns

NETGEAR  vs.  L3 TECHNOLOGIES INC

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 inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

L3 TECHNOLOGIES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L3 TECHNOLOGIES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 502413BE6 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 502413BE6

The main advantage of trading using opposite NETGEAR and 502413BE6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, 502413BE6 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 502413BE6 will offset losses from the drop in 502413BE6's long position.

The idea behind NETGEAR and L3 TECHNOLOGIES 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.