Correlation Between NETGEAR and Royalty Management

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

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

Diversification Opportunities for NETGEAR and Royalty Management

-0.44

Correlation Coefficient

NETGEAR  Royalty Management

Very good diversification

The 3 months correlation between NETGEAR and Royalty is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management 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 Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of NETGEAR i.e., NETGEAR and Royalty Management go up and down completely randomly.

Pair Corralation between NETGEAR and Royalty Management

Given the investment horizon of 90 days NETGEAR is expected to generate 36.8 times less return on investment than Royalty Management. But when comparing it to its historical volatility, NETGEAR is 12.02 times less risky than Royalty Management. It trades about 0.04 of its potential returns per unit of risk. Royalty Management Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Royalty Management Holding on September 13, 2024 and sell it today you would lose (4.88) from holding Royalty Management Holding or give up 81.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	31.31%
Values	Daily Returns

NETGEAR  vs.  Royalty Management Holding

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.

Royalty Management

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Royalty Management Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Royalty Management showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and Royalty Management

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

The idea behind NETGEAR and Royalty Management 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.