Correlation Between NetScout Systems and Donegal Group

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

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

Diversification Opportunities for NetScout Systems and Donegal Group

0.56

Correlation Coefficient

NetScout Systems  Donegal Group

Very weak diversification

The 3 months correlation between NetScout and Donegal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of NetScout Systems i.e., NetScout Systems and Donegal Group go up and down completely randomly.

Pair Corralation between NetScout Systems and Donegal Group

Given the investment horizon of 90 days NetScout Systems is expected to under-perform the Donegal Group. But the stock apears to be less risky and, when comparing its historical volatility, NetScout Systems is 1.53 times less risky than Donegal Group. The stock trades about -0.02 of its potential returns per unit of risk. The Donegal Group B is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,461  in Donegal Group B on October 8, 2024 and sell it today you would lose (49.00) from holding Donegal Group B or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.31%
Values	Daily Returns

NetScout Systems  vs.  Donegal Group B

NetScout Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 5 (%) 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 February 2025.

Donegal Group B

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and Donegal Group

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

The idea behind NetScout Systems and Donegal Group B 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.