Correlation Between NETGEAR and China Southern

Can any of the company-specific risk be diversified away by investing in both NETGEAR and China Southern 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 China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NETGEAR and China Southern Airlines, you can compare the effects of market volatilities on NETGEAR and China Southern 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 China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and China Southern.

Diversification Opportunities for NETGEAR and China Southern

0.59

Correlation Coefficient

NETGEAR  China Southern

Very weak diversification

The 3 months correlation between NETGEAR and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of NETGEAR i.e., NETGEAR and China Southern go up and down completely randomly.

Pair Corralation between NETGEAR and China Southern

If you would invest  1,591  in NETGEAR on September 8, 2024 and sell it today you would earn a total of  880.00  from holding NETGEAR or generate 55.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

NETGEAR  vs.  China Southern Airlines

NETGEAR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

China Southern Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Southern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, China Southern is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NETGEAR and China Southern

The main advantage of trading using opposite NETGEAR and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern's long position.

The idea behind NETGEAR and China Southern Airlines 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.