Correlation Between ECD Automotive and NETGEAR
Can any of the company-specific risk be diversified away by investing in both ECD Automotive 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 ECD Automotive and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and NETGEAR, you can compare the effects of market volatilities on ECD Automotive 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 ECD Automotive with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and NETGEAR.
Diversification Opportunities for ECD Automotive and NETGEAR
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ECD and NETGEAR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and NETGEAR go up and down completely randomly.
Pair Corralation between ECD Automotive and NETGEAR
Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the NETGEAR. In addition to that, ECD Automotive is 2.16 times more volatile than NETGEAR. It trades about -0.06 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.08 per unit of volatility. If you would invest 1,267 in NETGEAR on September 12, 2024 and sell it today you would earn a total of 1,259 from holding NETGEAR or generate 99.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECD Automotive Design vs. NETGEAR
Performance |
| Timeline |
| ECD Automotive Design |
| NETGEAR |
ECD Automotive and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and NETGEAR
The main advantage of trading using opposite ECD Automotive and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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.| ECD Automotive vs. NETGEAR | ECD Automotive vs. Asure Software | ECD Automotive vs. Analog Devices | ECD Automotive vs. Bridgford Foods |
| NETGEAR vs. Hewlett Packard Enterprise | NETGEAR vs. Juniper Networks | NETGEAR vs. Ciena Corp | NETGEAR vs. Cisco Systems |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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