Correlation Between NetSol Technologies and Marchex

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

By analyzing existing cross correlation between NetSol Technologies and Marchex, you can compare the effects of market volatilities on NetSol Technologies and Marchex 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 NetSol Technologies with a short position of Marchex. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetSol Technologies and Marchex.

Diversification Opportunities for NetSol Technologies and Marchex

-0.26

Correlation Coefficient

NetSol Technologies  Marchex

Very good diversification

The 3 months correlation between NetSol and Marchex is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NetSol Technologies and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and NetSol Technologies 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 NetSol Technologies are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of NetSol Technologies i.e., NetSol Technologies and Marchex go up and down completely randomly.

Pair Corralation between NetSol Technologies and Marchex

Given the investment horizon of 90 days NetSol Technologies is expected to generate 2.09 times less return on investment than Marchex. But when comparing it to its historical volatility, NetSol Technologies is 1.12 times less risky than Marchex. It trades about 0.01 of its potential returns per unit of risk. Marchex is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Marchex on September 27, 2024 and sell it today you would earn a total of  18.00  from holding Marchex or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NetSol Technologies  vs.  Marchex

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, NetSol Technologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Marchex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, Marchex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NetSol Technologies and Marchex

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

The idea behind NetSol Technologies and Marchex 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 Valuation module to check real value of public entities based on technical and fundamental data.