Correlation Between Eltek and NETGEAR

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

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

Diversification Opportunities for Eltek and NETGEAR

0.84

Correlation Coefficient

Eltek  NETGEAR

Very poor diversification

The 3 months correlation between Eltek and NETGEAR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Eltek 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 Eltek 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 Eltek i.e., Eltek and NETGEAR go up and down completely randomly.

Pair Corralation between Eltek and NETGEAR

Given the investment horizon of 90 days Eltek is expected to generate 0.67 times more return on investment than NETGEAR. However, Eltek is 1.5 times less risky than NETGEAR. It trades about 0.15 of its potential returns per unit of risk. NETGEAR is currently generating about 0.07 per unit of risk. If you would invest  826.00  in Eltek on April 1, 2025 and sell it today you would earn a total of  224.00  from holding Eltek or generate 27.12% return on investment over 90 days.

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

Eltek  vs.  NETGEAR

Eltek

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eltek are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Eltek disclosed solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 5 (%) 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.

Pair Trading with Eltek and NETGEAR

The main advantage of trading using opposite Eltek and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eltek 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 Eltek 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.