Correlation Between Ubiquiti Networks and NETGEAR

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

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

Diversification Opportunities for Ubiquiti Networks and NETGEAR

0.52

Correlation Coefficient

Ubiquiti Networks  NETGEAR

Very weak diversification

The 3 months correlation between Ubiquiti and NETGEAR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Ubiquiti Networks 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 Ubiquiti Networks 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 Ubiquiti Networks i.e., Ubiquiti Networks and NETGEAR go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and NETGEAR

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.22 times more return on investment than NETGEAR. However, Ubiquiti Networks is 1.22 times more volatile than NETGEAR. It trades about -0.02 of its potential returns per unit of risk. NETGEAR is currently generating about -0.05 per unit of risk. If you would invest  33,494  in Ubiquiti Networks on December 29, 2024 and sell it today you would lose (2,467) from holding Ubiquiti Networks or give up 7.37% of portfolio value over 90 days.

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

Ubiquiti Networks  vs.  NETGEAR

Ubiquiti Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Ubiquiti Networks is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 Ubiquiti Networks and NETGEAR

The main advantage of trading using opposite Ubiquiti Networks and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ubiquiti Networks 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 Ubiquiti Networks 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.