Correlation Between NETGEAR and Atmus Filtration

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

By analyzing existing cross correlation between NETGEAR and Atmus Filtration Technologies, you can compare the effects of market volatilities on NETGEAR and Atmus Filtration 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 Atmus Filtration. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Atmus Filtration.

Diversification Opportunities for NETGEAR and Atmus Filtration

0.59

Correlation Coefficient

NETGEAR  Atmus Filtration

Very weak diversification

The 3 months correlation between NETGEAR and Atmus is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Atmus Filtration Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmus Filtration Tec 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 Atmus Filtration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmus Filtration Tec has no effect on the direction of NETGEAR i.e., NETGEAR and Atmus Filtration go up and down completely randomly.

Pair Corralation between NETGEAR and Atmus Filtration

Given the investment horizon of 90 days NETGEAR is expected to generate 1.36 times more return on investment than Atmus Filtration. However, NETGEAR is 1.36 times more volatile than Atmus Filtration Technologies. It trades about 0.25 of its potential returns per unit of risk. Atmus Filtration Technologies is currently generating about 0.06 per unit of risk. If you would invest  1,991  in NETGEAR on September 26, 2024 and sell it today you would earn a total of  848.00  from holding NETGEAR or generate 42.59% return on investment over 90 days.

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

NETGEAR  vs.  Atmus Filtration Technologies

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Atmus Filtration Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atmus Filtration Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Atmus Filtration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NETGEAR and Atmus Filtration

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

The idea behind NETGEAR and Atmus Filtration Technologies 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.