Correlation Between NETGEAR and Software Acquisition

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

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

Diversification Opportunities for NETGEAR and Software Acquisition

-0.26

Correlation Coefficient

NETGEAR  Software Acquisition

Very good diversification

The 3 months correlation between NETGEAR and Software is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition 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 Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of NETGEAR i.e., NETGEAR and Software Acquisition go up and down completely randomly.

Pair Corralation between NETGEAR and Software Acquisition

Given the investment horizon of 90 days NETGEAR is expected to generate 43.59 times less return on investment than Software Acquisition. But when comparing it to its historical volatility, NETGEAR is 9.19 times less risky than Software Acquisition. It trades about 0.04 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.95  in Software Acquisition Group on April 30, 2025 and sell it today you would earn a total of  1.04  from holding Software Acquisition Group or generate 109.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.77%
Values	Daily Returns

NETGEAR  vs.  Software Acquisition Group

NETGEAR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Software Acquisition

Risk-Adjusted Performance

Solid

Over the last 90 days Software Acquisition Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady technical and fundamental indicators, Software Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NETGEAR and Software Acquisition

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

The idea behind NETGEAR and Software Acquisition Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.