Correlation Between Optical Cable and NETGEAR

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

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

Diversification Opportunities for Optical Cable and NETGEAR

-0.59

Correlation Coefficient

Optical Cable  NETGEAR

Excellent diversification

The 3 months correlation between Optical and NETGEAR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Optical Cable 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 Optical Cable 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 Optical Cable i.e., Optical Cable and NETGEAR go up and down completely randomly.

Pair Corralation between Optical Cable and NETGEAR

Considering the 90-day investment horizon Optical Cable is expected to generate 3.21 times more return on investment than NETGEAR. However, Optical Cable is 3.21 times more volatile than NETGEAR. It trades about 0.16 of its potential returns per unit of risk. NETGEAR is currently generating about -0.15 per unit of risk. If you would invest  299.00  in Optical Cable on May 20, 2025 and sell it today you would earn a total of  242.00  from holding Optical Cable or generate 80.94% return on investment over 90 days.

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

Optical Cable  vs.  NETGEAR

Optical Cable

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optical Cable are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Optical Cable exhibited 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 Optical Cable and NETGEAR

The main advantage of trading using opposite Optical Cable and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optical Cable 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 Optical Cable 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.