Correlation Between ReTo Eco and NETGEAR

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

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

Diversification Opportunities for ReTo Eco and NETGEAR

-0.79

Correlation Coefficient

ReTo Eco  NETGEAR

Pay attention - limited upside

The 3 months correlation between ReTo and NETGEAR is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and ReTo Eco 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 ReTo Eco Solutions 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 ReTo Eco i.e., ReTo Eco and NETGEAR go up and down completely randomly.

Pair Corralation between ReTo Eco and NETGEAR

Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the NETGEAR. In addition to that, ReTo Eco is 1.53 times more volatile than NETGEAR. It trades about -0.08 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.28 per unit of volatility. If you would invest  2,119  in NETGEAR on September 19, 2024 and sell it today you would earn a total of  759.00  from holding NETGEAR or generate 35.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

ReTo Eco Solutions  vs.  NETGEAR

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ReTo Eco and NETGEAR

The main advantage of trading using opposite ReTo Eco and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReTo Eco 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 ReTo Eco Solutions 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.