Correlation Between GEN Restaurant and NETGEAR

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

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

Diversification Opportunities for GEN Restaurant and NETGEAR

0.09

Correlation Coefficient

GEN Restaurant  NETGEAR

Significant diversification

The 3 months correlation between GEN and NETGEAR is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and GEN Restaurant 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 GEN Restaurant Group, 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 GEN Restaurant i.e., GEN Restaurant and NETGEAR go up and down completely randomly.

Pair Corralation between GEN Restaurant and NETGEAR

Given the investment horizon of 90 days GEN Restaurant is expected to generate 46.38 times less return on investment than NETGEAR. But when comparing it to its historical volatility, GEN Restaurant Group, is 1.18 times less risky than NETGEAR. It trades about 0.0 of its potential returns per unit of risk. NETGEAR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,632  in NETGEAR on September 1, 2024 and sell it today you would earn a total of  828.00  from holding NETGEAR or generate 50.74% return on investment over 90 days.

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

GEN Restaurant Group,  vs.  NETGEAR

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEN Restaurant and NETGEAR

The main advantage of trading using opposite GEN Restaurant and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.