Correlation Between Lesaka Technologies and NetScout Systems

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

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

Diversification Opportunities for Lesaka Technologies and NetScout Systems

-0.67

Correlation Coefficient

Lesaka Technologies  NetScout Systems

Excellent diversification

The 3 months correlation between Lesaka and NetScout is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lesaka Technologies and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Lesaka Technologies 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 Lesaka Technologies 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 Lesaka Technologies i.e., Lesaka Technologies and NetScout Systems go up and down completely randomly.

Pair Corralation between Lesaka Technologies and NetScout Systems

Given the investment horizon of 90 days Lesaka Technologies is expected to under-perform the NetScout Systems. But the stock apears to be less risky and, when comparing its historical volatility, Lesaka Technologies is 1.11 times less risky than NetScout Systems. The stock trades about -0.05 of its potential returns per unit of risk. The NetScout Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,217  in NetScout Systems on November 28, 2024 and sell it today you would earn a total of  103.00  from holding NetScout Systems or generate 4.65% return on investment over 90 days.

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

Lesaka Technologies  vs.  NetScout Systems

Lesaka Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lesaka Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

NetScout Systems

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Lesaka Technologies and NetScout Systems

The main advantage of trading using opposite Lesaka Technologies and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lesaka Technologies 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 Lesaka Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.