Correlation Between NetScout Systems and Alarum Technologies

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

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

Diversification Opportunities for NetScout Systems and Alarum Technologies

0.22

Correlation Coefficient

NetScout Systems  Alarum Technologies

Modest diversification

The 3 months correlation between NetScout and Alarum is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and NetScout Systems 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 NetScout Systems are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of NetScout Systems i.e., NetScout Systems and Alarum Technologies go up and down completely randomly.

Pair Corralation between NetScout Systems and Alarum Technologies

Given the investment horizon of 90 days NetScout Systems is expected to generate 0.46 times more return on investment than Alarum Technologies. However, NetScout Systems is 2.17 times less risky than Alarum Technologies. It trades about 0.0 of its potential returns per unit of risk. Alarum Technologies is currently generating about -0.17 per unit of risk. If you would invest  2,150  in NetScout Systems on December 30, 2024 and sell it today you would lose (29.00) from holding NetScout Systems or give up 1.35% of portfolio value over 90 days.

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

NetScout Systems  vs.  Alarum Technologies

NetScout Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days NetScout Systems has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Alarum Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alarum Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NetScout Systems and Alarum Technologies

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

The idea behind NetScout Systems and Alarum Technologies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.