Correlation Between Corning Incorporated and NETGEAR

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

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

Diversification Opportunities for Corning Incorporated and NETGEAR

0.85

Correlation Coefficient

Corning Incorporated  NETGEAR

Very poor diversification

The 3 months correlation between Corning and NETGEAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Corning Incorporated and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Corning Incorporated 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 Corning Incorporated 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 Corning Incorporated i.e., Corning Incorporated and NETGEAR go up and down completely randomly.

Pair Corralation between Corning Incorporated and NETGEAR

Considering the 90-day investment horizon Corning Incorporated is expected to generate 2.44 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Corning Incorporated is 3.2 times less risky than NETGEAR. It trades about 0.22 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	Strong
Accuracy	100.0%
Values	Daily Returns

Corning Incorporated  vs.  NETGEAR

Corning Incorporated

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Corning Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

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 Corning Incorporated and NETGEAR

The main advantage of trading using opposite Corning Incorporated and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corning Incorporated 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 Corning Incorporated 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.