Correlation Between NetScout Systems and Five9

Can any of the company-specific risk be diversified away by investing in both NetScout Systems and Five9 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 Five9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NetScout Systems and Five9 Inc, you can compare the effects of market volatilities on NetScout Systems and Five9 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 Five9. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetScout Systems and Five9.

Diversification Opportunities for NetScout Systems and Five9

0.74

Correlation Coefficient

NetScout Systems  Five9

Poor diversification

The 3 months correlation between NetScout and Five9 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Five9 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five9 Inc 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 Five9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five9 Inc has no effect on the direction of NetScout Systems i.e., NetScout Systems and Five9 go up and down completely randomly.

Pair Corralation between NetScout Systems and Five9

Given the investment horizon of 90 days NetScout Systems is expected to generate 6.66 times less return on investment than Five9. In addition to that, NetScout Systems is 1.1 times more volatile than Five9 Inc. It trades about 0.05 of its total potential returns per unit of risk. Five9 Inc is currently generating about 0.37 per unit of volatility. If you would invest  3,768  in Five9 Inc on September 20, 2024 and sell it today you would earn a total of  505.00  from holding Five9 Inc or generate 13.4% 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.  Five9 Inc

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.

Five9 Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Five9 Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Five9 displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and Five9

The main advantage of trading using opposite NetScout Systems and Five9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetScout Systems position performs unexpectedly, Five9 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 Five9 will offset losses from the drop in Five9's long position.

The idea behind NetScout Systems and Five9 Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.