Correlation Between NETGEAR and Alabama Aircraft

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

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

Diversification Opportunities for NETGEAR and Alabama Aircraft

-0.31

Correlation Coefficient

NETGEAR  Alabama Aircraft

Very good diversification

The 3 months correlation between NETGEAR and Alabama is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Alabama Aircraft Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alabama Aircraft Ind and NETGEAR 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 NETGEAR are associated (or correlated) with Alabama Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alabama Aircraft Ind has no effect on the direction of NETGEAR i.e., NETGEAR and Alabama Aircraft go up and down completely randomly.

Pair Corralation between NETGEAR and Alabama Aircraft

If you would invest  2,194  in NETGEAR on September 13, 2024 and sell it today you would earn a total of  329.00  from holding NETGEAR or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

NETGEAR  vs.  Alabama Aircraft Industries

NETGEAR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Alabama Aircraft Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alabama Aircraft Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Alabama Aircraft is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NETGEAR and Alabama Aircraft

The main advantage of trading using opposite NETGEAR and Alabama Aircraft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, Alabama Aircraft 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 Alabama Aircraft will offset losses from the drop in Alabama Aircraft's long position.

The idea behind NETGEAR and Alabama Aircraft Industries 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.