Correlation Between Stepan and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and NETGEAR, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and NETGEAR.
Diversification Opportunities for Stepan and NETGEAR
Excellent diversification
The 3 months correlation between Stepan and NETGEAR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Stepan 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 Stepan Company 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 Stepan i.e., Stepan and NETGEAR go up and down completely randomly.
Pair Corralation between Stepan and NETGEAR
Considering the 90-day investment horizon Stepan is expected to generate 2.44 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Stepan Company is 1.38 times less risky than NETGEAR. It trades about 0.03 of its potential returns per unit of risk. NETGEAR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,715 in NETGEAR on November 2, 2024 and sell it today you would earn a total of 61.00 from holding NETGEAR or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. NETGEAR
Performance |
| Timeline |
| Stepan Company |
| NETGEAR |
Stepan and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and NETGEAR
The main advantage of trading using opposite Stepan and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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.The idea behind Stepan Company and NETGEAR 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.| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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