Correlation Between Aurora Mobile and NetScout Systems

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

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

Diversification Opportunities for Aurora Mobile and NetScout Systems

-0.11

Correlation Coefficient

Aurora Mobile  NetScout Systems

Good diversification

The 3 months correlation between Aurora and NetScout is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Mobile and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Aurora Mobile 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 Aurora Mobile 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 Aurora Mobile i.e., Aurora Mobile and NetScout Systems go up and down completely randomly.

Pair Corralation between Aurora Mobile and NetScout Systems

Allowing for the 90-day total investment horizon Aurora Mobile is expected to under-perform the NetScout Systems. In addition to that, Aurora Mobile is 3.23 times more volatile than NetScout Systems. It trades about -0.13 of its total potential returns per unit of risk. NetScout Systems is currently generating about 0.01 per unit of volatility. If you would invest  2,194  in NetScout Systems on September 25, 2024 and sell it today you would lose (1.00) from holding NetScout Systems or give up 0.05% of portfolio value over 90 days.

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

Aurora Mobile  vs.  NetScout Systems

Aurora Mobile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Mobile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Aurora Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

NetScout Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 3 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aurora Mobile and NetScout Systems

The main advantage of trading using opposite Aurora Mobile and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Mobile 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 Aurora Mobile 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.