Correlation Between COPT Defense and NETGEAR

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

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

Diversification Opportunities for COPT Defense and NETGEAR

0.36

Correlation Coefficient

COPT Defense  NETGEAR

Weak diversification

The 3 months correlation between COPT and NETGEAR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and COPT Defense 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 COPT Defense Properties 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 COPT Defense i.e., COPT Defense and NETGEAR go up and down completely randomly.

Pair Corralation between COPT Defense and NETGEAR

Considering the 90-day investment horizon COPT Defense Properties is expected to generate 0.36 times more return on investment than NETGEAR. However, COPT Defense Properties is 2.79 times less risky than NETGEAR. It trades about 0.15 of its potential returns per unit of risk. NETGEAR is currently generating about 0.05 per unit of risk. If you would invest  2,530  in COPT Defense Properties on April 29, 2025 and sell it today you would earn a total of  265.00  from holding COPT Defense Properties or generate 10.47% return on investment over 90 days.

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

COPT Defense Properties  vs.  NETGEAR

COPT Defense Properties

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, COPT Defense may actually be approaching a critical reversion point that can send shares even higher in August 2025.

NETGEAR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with COPT Defense and NETGEAR

The main advantage of trading using opposite COPT Defense and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense Properties 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.