Correlation Between NetApp and Pure Storage
Can any of the company-specific risk be diversified away by investing in both NetApp and Pure Storage 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 NetApp and Pure Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and Pure Storage, you can compare the effects of market volatilities on NetApp and Pure Storage 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 NetApp with a short position of Pure Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and Pure Storage.
Diversification Opportunities for NetApp and Pure Storage
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NetApp and Pure is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage and NetApp 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 NetApp Inc are associated (or correlated) with Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of NetApp i.e., NetApp and Pure Storage go up and down completely randomly.
Pair Corralation between NetApp and Pure Storage
Assuming the 90 days horizon NetApp is expected to generate 1.34 times less return on investment than Pure Storage. But when comparing it to its historical volatility, NetApp Inc is 1.48 times less risky than Pure Storage. It trades about 0.07 of its potential returns per unit of risk. Pure Storage is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,979 in Pure Storage on November 6, 2024 and sell it today you would earn a total of 3,587 from holding Pure Storage or generate 120.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetApp Inc vs. Pure Storage
Performance |
| Timeline |
| NetApp Inc |
| Pure Storage |
NetApp and Pure Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetApp and Pure Storage
The main advantage of trading using opposite NetApp and Pure Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp position performs unexpectedly, Pure Storage 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 Pure Storage will offset losses from the drop in Pure Storage's long position.| NetApp vs. EPSILON HEALTHCARE LTD | NetApp vs. CARDINAL HEALTH | NetApp vs. Acadia Healthcare | NetApp vs. INTER CARS SA |
| Pure Storage vs. Unity Software | Pure Storage vs. Direct Line Insurance | Pure Storage vs. SBI Insurance Group | Pure Storage vs. Guidewire Software |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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