Correlation Between Credo Technology and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Credo Technology 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 Credo Technology and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credo Technology Group and NETGEAR, you can compare the effects of market volatilities on Credo Technology 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 Credo Technology with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credo Technology and NETGEAR.
Diversification Opportunities for Credo Technology and NETGEAR
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Credo and NETGEAR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Credo Technology Group and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Credo Technology 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 Credo Technology Group 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 Credo Technology i.e., Credo Technology and NETGEAR go up and down completely randomly.
Pair Corralation between Credo Technology and NETGEAR
Given the investment horizon of 90 days Credo Technology is expected to generate 1.46 times less return on investment than NETGEAR. In addition to that, Credo Technology is 2.08 times more volatile than NETGEAR. It trades about 0.11 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.33 per unit of volatility. If you would invest 2,044 in NETGEAR on August 30, 2024 and sell it today you would earn a total of 360.00 from holding NETGEAR or generate 17.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credo Technology Group vs. NETGEAR
Performance |
| Timeline |
| Credo Technology |
| NETGEAR |
Credo Technology and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credo Technology and NETGEAR
The main advantage of trading using opposite Credo Technology and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credo Technology 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.| Credo Technology vs. Zebra Technologies | Credo Technology vs. Ubiquiti Networks | Credo Technology vs. Ciena Corp | Credo Technology vs. Clearfield |
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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.
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