Correlation Between Benchmark Electronics and NETGEAR

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

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

Diversification Opportunities for Benchmark Electronics and NETGEAR

0.73

Correlation Coefficient

Benchmark Electronics  NETGEAR

Poor diversification

The 3 months correlation between Benchmark and NETGEAR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and NETGEAR go up and down completely randomly.

Pair Corralation between Benchmark Electronics and NETGEAR

Considering the 90-day investment horizon Benchmark Electronics is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Benchmark Electronics is 1.28 times less risky than NETGEAR. The stock trades about -0.07 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,825  in NETGEAR on February 4, 2025 and sell it today you would lose (43.00) from holding NETGEAR or give up 1.52% of portfolio value over 90 days.

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

Benchmark Electronics  vs.  NETGEAR

Benchmark Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NETGEAR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Benchmark Electronics and NETGEAR

The main advantage of trading using opposite Benchmark Electronics and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.