Correlation Between NETGEAR and Technical Communications

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

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

Diversification Opportunities for NETGEAR and Technical Communications

-0.47

Correlation Coefficient

NETGEAR  Technical Communications

Very good diversification

The 3 months correlation between NETGEAR and Technical is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Technical Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technical Communications 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 Technical Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technical Communications has no effect on the direction of NETGEAR i.e., NETGEAR and Technical Communications go up and down completely randomly.

Pair Corralation between NETGEAR and Technical Communications

If you would invest  2,420  in NETGEAR on September 13, 2024 and sell it today you would earn a total of  103.00  from holding NETGEAR or generate 4.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

NETGEAR  vs.  Technical Communications

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.

Technical Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Technical Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Technical Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NETGEAR and Technical Communications

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

The idea behind NETGEAR and Technical Communications 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.