Correlation Between NETGEAR and WESTAR

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

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

Diversification Opportunities for NETGEAR and WESTAR

0.17

Correlation Coefficient

NETGEAR  WESTAR

Average diversification

The 3 months correlation between NETGEAR and WESTAR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and WESTAR ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTAR ENERGY 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 WESTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTAR ENERGY INC has no effect on the direction of NETGEAR i.e., NETGEAR and WESTAR go up and down completely randomly.

Pair Corralation between NETGEAR and WESTAR

Given the investment horizon of 90 days NETGEAR is expected to generate 1.99 times more return on investment than WESTAR. However, NETGEAR is 1.99 times more volatile than WESTAR ENERGY INC. It trades about 0.15 of its potential returns per unit of risk. WESTAR ENERGY INC is currently generating about -0.12 per unit of risk. If you would invest  1,672  in NETGEAR on September 4, 2024 and sell it today you would earn a total of  785.00  from holding NETGEAR or generate 46.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

NETGEAR  vs.  WESTAR ENERGY INC

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) 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.

WESTAR ENERGY INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTAR ENERGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for WESTAR ENERGY INC investors.

Pair Trading with NETGEAR and WESTAR

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

The idea behind NETGEAR and WESTAR ENERGY 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.