Correlation Between Applied Opt and NetApp

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

By analyzing existing cross correlation between Applied Opt and NetApp Inc, you can compare the effects of market volatilities on Applied Opt and NetApp 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 Applied Opt with a short position of NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Opt and NetApp.

Diversification Opportunities for Applied Opt and NetApp

0.82

Correlation Coefficient

Applied Opt  NetApp

Very poor diversification

The 3 months correlation between Applied and NetApp is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Applied Opt 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 Applied Opt are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Applied Opt i.e., Applied Opt and NetApp go up and down completely randomly.

Pair Corralation between Applied Opt and NetApp

Given the investment horizon of 90 days Applied Opt is expected to generate 4.26 times more return on investment than NetApp. However, Applied Opt is 4.26 times more volatile than NetApp Inc. It trades about 0.21 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.2 per unit of risk. If you would invest  1,279  in Applied Opt on April 24, 2025 and sell it today you would earn a total of  1,356  from holding Applied Opt or generate 106.02% return on investment over 90 days.

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

Applied Opt  vs.  NetApp Inc

Applied Opt

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Opt are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Applied Opt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NetApp Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Opt and NetApp

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

The idea behind Applied Opt and NetApp Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.