Correlation Between TESSCO Technologies and NETGEAR

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

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

Diversification Opportunities for TESSCO Technologies and NETGEAR

0.8

Correlation Coefficient

TESSCO Technologies  NETGEAR

Very poor diversification

The 3 months correlation between TESSCO and NETGEAR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TESSCO Technologies Incorporat and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and TESSCO Technologies 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 TESSCO Technologies Incorporated are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of TESSCO Technologies i.e., TESSCO Technologies and NETGEAR go up and down completely randomly.

Pair Corralation between TESSCO Technologies and NETGEAR

Given the investment horizon of 90 days TESSCO Technologies Incorporated is expected to generate 2.5 times more return on investment than NETGEAR. However, TESSCO Technologies is 2.5 times more volatile than NETGEAR. It trades about 0.08 of its potential returns per unit of risk. NETGEAR is currently generating about 0.04 per unit of risk. If you would invest  478.00  in TESSCO Technologies Incorporated on September 12, 2024 and sell it today you would earn a total of  421.00  from holding TESSCO Technologies Incorporated or generate 88.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	28.48%
Values	Daily Returns

TESSCO Technologies Incorporat  vs.  NETGEAR

TESSCO Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TESSCO Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TESSCO Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with TESSCO Technologies and NETGEAR

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

The idea behind TESSCO Technologies Incorporated and NETGEAR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.