Correlation Between Bill and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Bill 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 Bill and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bill Com Holdings and NETGEAR, you can compare the effects of market volatilities on Bill 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 Bill with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bill and NETGEAR.
Diversification Opportunities for Bill and NETGEAR
Poor diversification
The 3 months correlation between Bill and NETGEAR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Bill 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 Bill Com Holdings 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 Bill i.e., Bill and NETGEAR go up and down completely randomly.
Pair Corralation between Bill and NETGEAR
Given the investment horizon of 90 days Bill is expected to generate 5.16 times less return on investment than NETGEAR. In addition to that, Bill is 1.07 times more volatile than NETGEAR. It trades about 0.01 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.06 per unit of volatility. If you would invest 1,388 in NETGEAR on August 30, 2024 and sell it today you would earn a total of 1,016 from holding NETGEAR or generate 73.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bill Com Holdings vs. NETGEAR
Performance |
| Timeline |
| Bill Com Holdings |
| NETGEAR |
Bill and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bill and NETGEAR
The main advantage of trading using opposite Bill and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill 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 Bill Com Holdings 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.| NETGEAR vs. KVH Industries | NETGEAR vs. Merck Company | NETGEAR vs. Pharvaris BV | NETGEAR vs. Brinker International |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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