Correlation Between Rocket Internet and NetApp

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

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

Diversification Opportunities for Rocket Internet and NetApp

0.01

Correlation Coefficient

Rocket Internet  NetApp

Significant diversification

The 3 months correlation between Rocket and NetApp is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Rocket Internet i.e., Rocket Internet and NetApp go up and down completely randomly.

Pair Corralation between Rocket Internet and NetApp

Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the NetApp. But the stock apears to be less risky and, when comparing its historical volatility, Rocket Internet SE is 1.51 times less risky than NetApp. The stock trades about -0.01 of its potential returns per unit of risk. The NetApp Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,643  in NetApp Inc on October 7, 2024 and sell it today you would earn a total of  3,485  from holding NetApp Inc or generate 45.6% return on investment over 90 days.

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

Rocket Internet SE  vs.  NetApp Inc

Rocket Internet SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Rocket Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NetApp Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NetApp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rocket Internet and NetApp

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

The idea behind Rocket Internet SE and NetApp 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.