Correlation Between Valens and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Valens 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 Valens and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valens and NETGEAR, you can compare the effects of market volatilities on Valens 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 Valens with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valens and NETGEAR.
Diversification Opportunities for Valens and NETGEAR
Good diversification
The 3 months correlation between Valens and NETGEAR is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Valens and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Valens 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 Valens 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 Valens i.e., Valens and NETGEAR go up and down completely randomly.
Pair Corralation between Valens and NETGEAR
Considering the 90-day investment horizon Valens is expected to generate 4.07 times less return on investment than NETGEAR. In addition to that, Valens is 1.15 times more volatile than NETGEAR. It trades about 0.02 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.09 per unit of volatility. If you would invest 1,284 in NETGEAR on September 14, 2024 and sell it today you would earn a total of 1,256 from holding NETGEAR or generate 97.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valens vs. NETGEAR
Performance |
| Timeline |
| Valens |
| NETGEAR |
Valens and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valens and NETGEAR
The main advantage of trading using opposite Valens and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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.| Valens vs. ON Semiconductor | Valens vs. Globalfoundries | Valens vs. Wisekey International Holding | Valens vs. Nano Labs |
| NETGEAR vs. Passage Bio | NETGEAR vs. Black Diamond Therapeutics | NETGEAR vs. Alector | NETGEAR vs. Century Therapeutics |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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