Correlation Between NETGEAR and Pure Storage

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

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

Diversification Opportunities for NETGEAR and Pure Storage

0.86

Correlation Coefficient

NETGEAR  Pure Storage

Very poor diversification

The 3 months correlation between NETGEAR and Pure is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of NETGEAR i.e., NETGEAR and Pure Storage go up and down completely randomly.

Pair Corralation between NETGEAR and Pure Storage

Given the investment horizon of 90 days NETGEAR is expected to generate 1.26 times less return on investment than Pure Storage. In addition to that, NETGEAR is 1.47 times more volatile than Pure Storage. It trades about 0.09 of its total potential returns per unit of risk. Pure Storage is currently generating about 0.17 per unit of volatility. If you would invest  4,513  in Pure Storage on April 24, 2025 and sell it today you would earn a total of  1,067  from holding Pure Storage or generate 23.64% return on investment over 90 days.

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

NETGEAR  vs.  Pure Storage

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.

Pure Storage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and Pure Storage

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

The idea behind NETGEAR and Pure Storage 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.