Correlation Between Scholastic and NETGEAR

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

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

Diversification Opportunities for Scholastic and NETGEAR

-0.59

Correlation Coefficient

Scholastic  NETGEAR

Excellent diversification

The 3 months correlation between Scholastic and NETGEAR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Scholastic 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 Scholastic 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 Scholastic i.e., Scholastic and NETGEAR go up and down completely randomly.

Pair Corralation between Scholastic and NETGEAR

Given the investment horizon of 90 days Scholastic is expected to under-perform the NETGEAR. In addition to that, Scholastic is 2.03 times more volatile than NETGEAR. It trades about -0.21 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.23 per unit of volatility. If you would invest  2,471  in NETGEAR on October 7, 2024 and sell it today you would earn a total of  281.00  from holding NETGEAR or generate 11.37% return on investment over 90 days.

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

Scholastic  vs.  NETGEAR

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) 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 Scholastic and NETGEAR

The main advantage of trading using opposite Scholastic and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scholastic 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 Scholastic 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.