Correlation Between NETGEAR and Lake Resources
Can any of the company-specific risk be diversified away by investing in both NETGEAR and Lake Resources 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 NETGEAR and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and Lake Resources NL, you can compare the effects of market volatilities on NETGEAR and Lake Resources 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 NETGEAR with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Lake Resources.
Diversification Opportunities for NETGEAR and Lake Resources
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NETGEAR and Lake is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL and NETGEAR 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 NETGEAR are associated (or correlated) with Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of NETGEAR i.e., NETGEAR and Lake Resources go up and down completely randomly.
Pair Corralation between NETGEAR and Lake Resources
Given the investment horizon of 90 days NETGEAR is expected to generate 0.36 times more return on investment than Lake Resources. However, NETGEAR is 2.81 times less risky than Lake Resources. It trades about 0.09 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.0 per unit of risk. If you would invest 1,490 in NETGEAR on August 25, 2024 and sell it today you would earn a total of 940.00 from holding NETGEAR or generate 63.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NETGEAR vs. Lake Resources NL
Performance |
| Timeline |
| NETGEAR |
| Lake Resources NL |
NETGEAR and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NETGEAR and Lake Resources
The main advantage of trading using opposite NETGEAR and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' long position.The idea behind NETGEAR and Lake Resources NL 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.| Lake Resources vs. Sandstorm Gold Ltd | Lake Resources vs. Western Digital | Lake Resources vs. Arrow Electronics | Lake Resources vs. NETGEAR |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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