Correlation Between Microsoft and NETGEAR

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

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

Diversification Opportunities for Microsoft and NETGEAR

-0.63

Correlation Coefficient

Microsoft  NETGEAR

Excellent diversification

The 3 months correlation between Microsoft and NETGEAR is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and NETGEAR go up and down completely randomly.

Pair Corralation between Microsoft and NETGEAR

Given the investment horizon of 90 days Microsoft is expected to generate 0.39 times more return on investment than NETGEAR. However, Microsoft is 2.54 times less risky than NETGEAR. It trades about 0.26 of its potential returns per unit of risk. NETGEAR is currently generating about -0.1 per unit of risk. If you would invest  44,844  in Microsoft on May 11, 2025 and sell it today you would earn a total of  7,360  from holding Microsoft or generate 16.41% return on investment over 90 days.

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

Microsoft  vs.  NETGEAR

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

Weakest

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and NETGEAR

The main advantage of trading using opposite Microsoft and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.