Correlation Between Vmware and NetApp

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

Diversification Opportunities for Vmware and NetApp

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Vmware and NetApp is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vmware Inc and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Vmware 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 Vmware Inc 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 Vmware i.e., Vmware and NetApp go up and down completely randomly.

Pair Corralation between Vmware and NetApp

Considering the 90-day investment horizon Vmware Inc is expected to generate 1.3 times more return on investment than NetApp. However, Vmware is 1.3 times more volatile than NetApp Inc. It trades about -0.01 of its potential returns per unit of risk. NetApp Inc is currently generating about -0.04 per unit of risk. If you would invest  13,411  in Vmware Inc on April 6, 2022 and sell it today you would lose (2,008)  from holding Vmware Inc or give up 14.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vmware Inc  vs.  NetApp Inc

 Performance (%) 
      Timeline 
Vmware Inc 
Vmware Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vmware Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady primary indicators, Vmware may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Vmware Price Channel

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
0.0319
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 and NetApp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Vmware and NetApp

The main advantage of trading using opposite Vmware and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vmware 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 Vmware Inc 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.
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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