Correlation Between I3 Verticals and NetScout Systems

Can any of the company-specific risk be diversified away by investing in both I3 Verticals and NetScout Systems 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 I3 Verticals and NetScout Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between i3 Verticals and NetScout Systems, you can compare the effects of market volatilities on I3 Verticals and NetScout Systems 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 I3 Verticals with a short position of NetScout Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of I3 Verticals and NetScout Systems.

Diversification Opportunities for I3 Verticals and NetScout Systems

0.78

Correlation Coefficient

I3 Verticals  NetScout Systems

Poor diversification

The 3 months correlation between IIIV and NetScout is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding i3 Verticals and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and I3 Verticals 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 i3 Verticals are associated (or correlated) with NetScout Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetScout Systems has no effect on the direction of I3 Verticals i.e., I3 Verticals and NetScout Systems go up and down completely randomly.

Pair Corralation between I3 Verticals and NetScout Systems

Given the investment horizon of 90 days i3 Verticals is expected to generate 0.97 times more return on investment than NetScout Systems. However, i3 Verticals is 1.03 times less risky than NetScout Systems. It trades about 0.06 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.02 per unit of risk. If you would invest  2,367  in i3 Verticals on December 29, 2024 and sell it today you would earn a total of  170.00  from holding i3 Verticals or generate 7.18% return on investment over 90 days.

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

i3 Verticals  vs.  NetScout Systems

i3 Verticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in i3 Verticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, I3 Verticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NetScout Systems

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NetScout Systems is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with I3 Verticals and NetScout Systems

The main advantage of trading using opposite I3 Verticals and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I3 Verticals position performs unexpectedly, NetScout Systems 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 NetScout Systems will offset losses from the drop in NetScout Systems' long position.

The idea behind i3 Verticals and NetScout Systems 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.