Correlation Between NETGEAR and DR Horton

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

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

Diversification Opportunities for NETGEAR and DR Horton

-0.55

Correlation Coefficient

NETGEAR  DR Horton

Excellent diversification

The 3 months correlation between NETGEAR and DHI is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton 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 DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of NETGEAR i.e., NETGEAR and DR Horton go up and down completely randomly.

Pair Corralation between NETGEAR and DR Horton

Given the investment horizon of 90 days NETGEAR is expected to under-perform the DR Horton. But the stock apears to be less risky and, when comparing its historical volatility, NETGEAR is 1.31 times less risky than DR Horton. The stock trades about -0.12 of its potential returns per unit of risk. The DR Horton is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12,567  in DR Horton on May 5, 2025 and sell it today you would earn a total of  2,463  from holding DR Horton or generate 19.6% return on investment over 90 days.

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

NETGEAR  vs.  DR Horton

NETGEAR

Risk-Adjusted Performance

Very Weak

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.

DR Horton

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DR Horton are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, DR Horton demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and DR Horton

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

The idea behind NETGEAR and DR Horton 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.