Correlation Between NETGEAR and MACYS

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

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

Diversification Opportunities for NETGEAR and MACYS

-0.52

Correlation Coefficient

NETGEAR  MACYS

Excellent diversification

The 3 months correlation between NETGEAR and MACYS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and MACYS RETAIL HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACYS RETAIL HLDGS 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 MACYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACYS RETAIL HLDGS has no effect on the direction of NETGEAR i.e., NETGEAR and MACYS go up and down completely randomly.

Pair Corralation between NETGEAR and MACYS

Given the investment horizon of 90 days NETGEAR is expected to generate 2.06 times more return on investment than MACYS. However, NETGEAR is 2.06 times more volatile than MACYS RETAIL HLDGS. It trades about 0.03 of its potential returns per unit of risk. MACYS RETAIL HLDGS 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 Against
Strength	Very Weak
Accuracy	94.14%
Values	Daily Returns

NETGEAR  vs.  MACYS RETAIL HLDGS

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) 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.

MACYS RETAIL HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NETGEAR and MACYS

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

The idea behind NETGEAR and MACYS RETAIL HLDGS 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.