Correlation Between NETGEAR and AETNA

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

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

Diversification Opportunities for NETGEAR and AETNA

-0.57

Correlation Coefficient

NETGEAR  AETNA

Excellent diversification

The 3 months correlation between NETGEAR and AETNA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and AETNA INC NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC NEW 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC NEW has no effect on the direction of NETGEAR i.e., NETGEAR and AETNA go up and down completely randomly.

Pair Corralation between NETGEAR and AETNA

Given the investment horizon of 90 days NETGEAR is expected to generate 79.08 times less return on investment than AETNA. But when comparing it to its historical volatility, NETGEAR is 33.38 times less risky than AETNA. It trades about 0.04 of its potential returns per unit of risk. AETNA INC NEW is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,844  in AETNA INC NEW on September 12, 2024 and sell it today you would lose (309.00) from holding AETNA INC NEW or give up 2.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.42%
Values	Daily Returns

NETGEAR  vs.  AETNA INC NEW

NETGEAR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

AETNA INC NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AETNA INC NEW investors.

Pair Trading with NETGEAR and AETNA

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

The idea behind NETGEAR and AETNA INC NEW 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.