Correlation Between NETGEAR and Relief Therapeutics

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

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

Diversification Opportunities for NETGEAR and Relief Therapeutics

0.11

Correlation Coefficient

NETGEAR  Relief Therapeutics

Average diversification

The 3 months correlation between NETGEAR and Relief is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics 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 Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of NETGEAR i.e., NETGEAR and Relief Therapeutics go up and down completely randomly.

Pair Corralation between NETGEAR and Relief Therapeutics

If you would invest  1,607  in NETGEAR on September 5, 2024 and sell it today you would earn a total of  944.00  from holding NETGEAR or generate 58.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

NETGEAR  vs.  Relief Therapeutics Holding

NETGEAR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 14 (%) 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.

Relief Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Relief Therapeutics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NETGEAR and Relief Therapeutics

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

The idea behind NETGEAR and Relief Therapeutics Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.