Correlation Between Treasury Wine and NETGEAR

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

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

Diversification Opportunities for Treasury Wine and NETGEAR

0.64

Correlation Coefficient

Treasury Wine  NETGEAR

Poor diversification

The 3 months correlation between Treasury and NETGEAR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and NETGEAR go up and down completely randomly.

Pair Corralation between Treasury Wine and NETGEAR

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the NETGEAR. But the pink sheet apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 1.18 times less risky than NETGEAR. The pink sheet trades about -0.11 of its potential returns per unit of risk. The NETGEAR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,769  in NETGEAR on December 29, 2024 and sell it today you would lose (297.00) from holding NETGEAR or give up 10.73% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  NETGEAR

Treasury Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Treasury Wine and NETGEAR

The main advantage of trading using opposite Treasury Wine and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.