Correlation Between Weibo Corp and NETGEAR

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

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

Diversification Opportunities for Weibo Corp and NETGEAR

0.12

Correlation Coefficient

Weibo Corp  NETGEAR

Average diversification

The 3 months correlation between Weibo and NETGEAR is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and NETGEAR go up and down completely randomly.

Pair Corralation between Weibo Corp and NETGEAR

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.99 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Weibo Corp is 1.07 times less risky than NETGEAR. It trades about 0.07 of its potential returns per unit of risk. NETGEAR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,455  in NETGEAR on September 12, 2024 and sell it today you would earn a total of  1,053  from holding NETGEAR or generate 72.37% return on investment over 90 days.

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

Weibo Corp  vs.  NETGEAR

Weibo Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weibo Corp and NETGEAR

The main advantage of trading using opposite Weibo Corp and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.