Correlation Between Visteon Corp and NETGEAR

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

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

Diversification Opportunities for Visteon Corp and NETGEAR

-0.44

Correlation Coefficient

Visteon Corp  NETGEAR

Very good diversification

The 3 months correlation between Visteon and NETGEAR is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Visteon Corp 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 Visteon Corp 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 Visteon Corp i.e., Visteon Corp and NETGEAR go up and down completely randomly.

Pair Corralation between Visteon Corp and NETGEAR

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 1.82 times less return on investment than NETGEAR. In addition to that, Visteon Corp is 1.04 times more volatile than NETGEAR. It trades about 0.13 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.24 per unit of volatility. If you would invest  2,317  in NETGEAR on September 5, 2024 and sell it today you would earn a total of  234.00  from holding NETGEAR or generate 10.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visteon Corp  vs.  NETGEAR

Visteon Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Visteon Corp and NETGEAR

The main advantage of trading using opposite Visteon Corp and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visteon Corp 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 Visteon Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.