Correlation Between NETGEAR and Cirrus Logic

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

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

Diversification Opportunities for NETGEAR and Cirrus Logic

0.29

Correlation Coefficient

NETGEAR  Cirrus Logic

Modest diversification

The 3 months correlation between NETGEAR and Cirrus is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Cirrus Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirrus Logic 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 Cirrus Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirrus Logic has no effect on the direction of NETGEAR i.e., NETGEAR and Cirrus Logic go up and down completely randomly.

Pair Corralation between NETGEAR and Cirrus Logic

Given the investment horizon of 90 days NETGEAR is expected to under-perform the Cirrus Logic. In addition to that, NETGEAR is 2.26 times more volatile than Cirrus Logic. It trades about -0.21 of its total potential returns per unit of risk. Cirrus Logic is currently generating about -0.12 per unit of volatility. If you would invest  9,170  in Cirrus Logic on February 2, 2024 and sell it today you would lose (579.00) from holding Cirrus Logic or give up 6.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NETGEAR  vs.  Cirrus Logic

NETGEAR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Cirrus Logic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cirrus Logic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cirrus Logic may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with NETGEAR and Cirrus Logic

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

The idea behind NETGEAR and Cirrus Logic 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.