Correlation Between NETGEAR and Power Integrations

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

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

Diversification Opportunities for NETGEAR and Power Integrations

0.63

Correlation Coefficient

NETGEAR  Power Integrations

Poor diversification

The 3 months correlation between NETGEAR and Power is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of NETGEAR i.e., NETGEAR and Power Integrations go up and down completely randomly.

Pair Corralation between NETGEAR and Power Integrations

Given the investment horizon of 90 days NETGEAR is expected to generate 1.23 times more return on investment than Power Integrations. However, NETGEAR is 1.23 times more volatile than Power Integrations. It trades about 0.09 of its potential returns per unit of risk. Power Integrations is currently generating about 0.06 per unit of risk. If you would invest  2,243  in NETGEAR on April 24, 2025 and sell it today you would earn a total of  360.00  from holding NETGEAR or generate 16.05% return on investment over 90 days.

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

NETGEAR  vs.  Power Integrations

NETGEAR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Power Integrations

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Integrations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Power Integrations may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with NETGEAR and Power Integrations

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

The idea behind NETGEAR and Power Integrations 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.