Correlation Between Tesla and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and NETGEAR, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and NETGEAR.
Diversification Opportunities for Tesla and NETGEAR
Poor diversification
The 3 months correlation between Tesla and NETGEAR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and NETGEAR go up and down completely randomly.
Pair Corralation between Tesla and NETGEAR
Given the investment horizon of 90 days Tesla is expected to generate 1.85 times less return on investment than NETGEAR. In addition to that, Tesla is 1.22 times more volatile than NETGEAR. It trades about 0.03 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.06 per unit of volatility. If you would invest 1,267 in NETGEAR on January 10, 2025 and sell it today you would earn a total of 945.00 from holding NETGEAR or generate 74.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. NETGEAR
Performance |
| Timeline |
| Tesla Inc |
| NETGEAR |
Tesla and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and NETGEAR
The main advantage of trading using opposite Tesla and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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. Harmonic |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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