Correlation Between Network CN and NETGEAR

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

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

Diversification Opportunities for Network CN and NETGEAR

0.13

Correlation Coefficient

Network CN  NETGEAR

Average diversification

The 3 months correlation between Network and NETGEAR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Network CN and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Network CN 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 Network CN are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Network CN i.e., Network CN and NETGEAR go up and down completely randomly.

Pair Corralation between Network CN and NETGEAR

Given the investment horizon of 90 days Network CN is expected to generate 41.11 times more return on investment than NETGEAR. However, Network CN is 41.11 times more volatile than NETGEAR. It trades about 0.27 of its potential returns per unit of risk. NETGEAR is currently generating about 0.18 per unit of risk. If you would invest  0.14  in Network CN on September 5, 2024 and sell it today you would earn a total of  5.86  from holding Network CN or generate 4185.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Network CN  vs.  NETGEAR

Network CN

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 14 (%) 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.

Pair Trading with Network CN and NETGEAR

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

The idea behind Network CN and NETGEAR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.