Correlation Between NETGEAR and NBCUNIVERSAL

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

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

Diversification Opportunities for NETGEAR and NBCUNIVERSAL

-0.16

Correlation Coefficient

NETGEAR  NBCUNIVERSAL

Good diversification

The 3 months correlation between NETGEAR and NBCUNIVERSAL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and NBCUNIVERSAL MEDIA LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCUNIVERSAL MEDIA LLC 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 NBCUNIVERSAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCUNIVERSAL MEDIA LLC has no effect on the direction of NETGEAR i.e., NETGEAR and NBCUNIVERSAL go up and down completely randomly.

Pair Corralation between NETGEAR and NBCUNIVERSAL

Given the investment horizon of 90 days NETGEAR is expected to generate 125.92 times less return on investment than NBCUNIVERSAL. But when comparing it to its historical volatility, NETGEAR is 42.99 times less risky than NBCUNIVERSAL. It trades about 0.04 of its potential returns per unit of risk. NBCUNIVERSAL MEDIA LLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,804  in NBCUNIVERSAL MEDIA LLC on October 6, 2024 and sell it today you would lose (377.00) from holding NBCUNIVERSAL MEDIA LLC or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.47%
Values	Daily Returns

NETGEAR  vs.  NBCUNIVERSAL MEDIA LLC

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.

NBCUNIVERSAL MEDIA LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCUNIVERSAL MEDIA LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NBCUNIVERSAL 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 NBCUNIVERSAL

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

The idea behind NETGEAR and NBCUNIVERSAL MEDIA LLC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.