Correlation Between Proto Labs and NetApp

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

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

Diversification Opportunities for Proto Labs and NetApp

0.65

Correlation Coefficient

Proto Labs  NetApp

Poor diversification

The 3 months correlation between Proto and NetApp is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Proto Labs and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Proto Labs 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 Proto Labs are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Proto Labs i.e., Proto Labs and NetApp go up and down completely randomly.

Pair Corralation between Proto Labs and NetApp

Given the investment horizon of 90 days Proto Labs is expected to generate 1.45 times less return on investment than NetApp. In addition to that, Proto Labs is 1.29 times more volatile than NetApp Inc. It trades about 0.1 of its total potential returns per unit of risk. NetApp Inc is currently generating about 0.19 per unit of volatility. If you would invest  8,930  in NetApp Inc on May 1, 2025 and sell it today you would earn a total of  1,679  from holding NetApp Inc or generate 18.8% return on investment over 90 days.

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

Proto Labs  vs.  NetApp Inc

Proto Labs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proto Labs are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Proto Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

NetApp Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Proto Labs and NetApp

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

The idea behind Proto Labs and NetApp Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.