Correlation Between NETGEAR and LOCKHEED

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Can any of the company-specific risk be diversified away by investing in both NETGEAR and LOCKHEED 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 LOCKHEED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and LOCKHEED MARTIN P, you can compare the effects of market volatilities on NETGEAR and LOCKHEED 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 LOCKHEED. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and LOCKHEED.

Diversification Opportunities for NETGEAR and LOCKHEED

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NETGEAR and LOCKHEED is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and LOCKHEED MARTIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOCKHEED MARTIN P 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 LOCKHEED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOCKHEED MARTIN P has no effect on the direction of NETGEAR i.e., NETGEAR and LOCKHEED go up and down completely randomly.

Pair Corralation between NETGEAR and LOCKHEED

Given the investment horizon of 90 days NETGEAR is expected to generate 4.78 times more return on investment than LOCKHEED. However, NETGEAR is 4.78 times more volatile than LOCKHEED MARTIN P. It trades about 0.15 of its potential returns per unit of risk. LOCKHEED MARTIN P is currently generating about 0.02 per unit of risk. If you would invest  1,343  in NETGEAR on September 2, 2024 and sell it today you would earn a total of  1,117  from holding NETGEAR or generate 83.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

NETGEAR  vs.  LOCKHEED MARTIN P

 Performance 
       Timeline  
NETGEAR 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.
LOCKHEED MARTIN P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOCKHEED is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

NETGEAR and LOCKHEED Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NETGEAR and LOCKHEED

The main advantage of trading using opposite NETGEAR and LOCKHEED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, LOCKHEED 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 LOCKHEED will offset losses from the drop in LOCKHEED's long position.
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The idea behind NETGEAR and LOCKHEED MARTIN P 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.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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