Correlation Between Pembina Pipeline and NETGEAR

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

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

Diversification Opportunities for Pembina Pipeline and NETGEAR

-0.69

Correlation Coefficient

Pembina Pipeline  NETGEAR

Excellent diversification

The 3 months correlation between Pembina and NETGEAR is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline i.e., Pembina Pipeline and NETGEAR go up and down completely randomly.

Pair Corralation between Pembina Pipeline and NETGEAR

Assuming the 90 days horizon Pembina Pipeline is expected to under-perform the NETGEAR. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pembina Pipeline is 4.11 times less risky than NETGEAR. The pink sheet trades about -0.12 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,033  in NETGEAR on October 23, 2024 and sell it today you would earn a total of  684.00  from holding NETGEAR or generate 33.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Pembina Pipeline  vs.  NETGEAR

Pembina Pipeline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) 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.

Pair Trading with Pembina Pipeline and NETGEAR

The main advantage of trading using opposite Pembina Pipeline and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.