Correlation Between NetApp and Vmware

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Can any of the company-specific risk be diversified away by investing in both NetApp and Vmware 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 NetApp and Vmware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and Vmware Inc, you can compare the effects of market volatilities on NetApp and Vmware 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 NetApp with a short position of Vmware. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and Vmware.

Diversification Opportunities for NetApp and Vmware

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between NetApp and Vmware is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Vmware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vmware Inc and NetApp 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 NetApp Inc are associated (or correlated) with Vmware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vmware Inc has no effect on the direction of NetApp i.e., NetApp and Vmware go up and down completely randomly.

Pair Corralation between NetApp and Vmware

Given the investment horizon of 90 days NetApp Inc is expected to under-perform the Vmware. But the stock apears to be less risky and, when comparing its historical volatility, NetApp Inc is 1.78 times less risky than Vmware. The stock trades about -0.2 of its potential returns per unit of risk. The Vmware Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11,584  in Vmware Inc on April 2, 2022 and sell it today you would lose (257.00)  from holding Vmware Inc or give up 2.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NetApp Inc  vs.  Vmware Inc

 Performance (%) 
      Timeline 
NetApp Inc 
NetApp Performance
0 of 100
Over the last 90 days NetApp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in August 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0306
Payout Ratio
0.38
Last Split Factor
2:1
Forward Annual Dividend Rate
2.0
Dividend Date
2022-07-27
Ex Dividend Date
2022-07-07
Last Split Date
2000-03-23

NetApp Price Channel

Vmware Inc 
Vmware Performance
0 of 100
Over the last 90 days Vmware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Vmware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Structure and Payout Changes

Payout Ratio
0.0405
Dividend Date
2021-11-01
Ex Dividend Date
2021-11-02

Vmware Price Channel

NetApp and Vmware Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with NetApp and Vmware

The main advantage of trading using opposite NetApp and Vmware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp position performs unexpectedly, Vmware 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 Vmware will offset losses from the drop in Vmware's long position.
The idea behind NetApp Inc and Vmware 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.
Check out your portfolio center. 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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