Correlation Between NetScout Systems and Confluent

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

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

Diversification Opportunities for NetScout Systems and Confluent

0.71

Correlation Coefficient

NetScout Systems  Confluent

Poor diversification

The 3 months correlation between NetScout and Confluent is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Confluent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Confluent 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 Confluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Confluent has no effect on the direction of NetScout Systems i.e., NetScout Systems and Confluent go up and down completely randomly.

Pair Corralation between NetScout Systems and Confluent

Given the investment horizon of 90 days NetScout Systems is expected to generate 16.21 times less return on investment than Confluent. But when comparing it to its historical volatility, NetScout Systems is 1.63 times less risky than Confluent. It trades about 0.02 of its potential returns per unit of risk. Confluent is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,969  in Confluent on September 21, 2024 and sell it today you would earn a total of  1,031  from holding Confluent or generate 52.36% return on investment over 90 days.

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

NetScout Systems  vs.  Confluent

NetScout Systems

Risk-Adjusted Performance

1 of 100

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.

Confluent

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and Confluent

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

The idea behind NetScout Systems and Confluent 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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.