Correlation Between NETGEAR and Stepan
Can any of the company-specific risk be diversified away by investing in both NETGEAR and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and Stepan Company, you can compare the effects of market volatilities on NETGEAR and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Stepan.
Diversification Opportunities for NETGEAR and Stepan
Weak diversification
The 3 months correlation between NETGEAR and Stepan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of NETGEAR i.e., NETGEAR and Stepan go up and down completely randomly.
Pair Corralation between NETGEAR and Stepan
Given the investment horizon of 90 days NETGEAR is expected to generate 1.77 times more return on investment than Stepan. However, NETGEAR is 1.77 times more volatile than Stepan Company. It trades about 0.06 of its potential returns per unit of risk. Stepan Company is currently generating about -0.02 per unit of risk. If you would invest 1,368 in NETGEAR on September 1, 2024 and sell it today you would earn a total of 1,092 from holding NETGEAR or generate 79.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NETGEAR vs. Stepan Company
Performance |
| Timeline |
| NETGEAR |
| Stepan Company |
NETGEAR and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NETGEAR and Stepan
The main advantage of trading using opposite NETGEAR and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| NETGEAR vs. Comtech Telecommunications Corp | NETGEAR vs. KVH Industries | NETGEAR vs. Silicom | NETGEAR vs. Knowles Cor |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |