Correlation Between NetScout Systems and GE Aerospace

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

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

Diversification Opportunities for NetScout Systems and GE Aerospace

0.0

Correlation Coefficient

NetScout Systems  GE Aerospace

Pay attention - limited upside

The 3 months correlation between NetScout and GE Aerospace is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of NetScout Systems i.e., NetScout Systems and GE Aerospace go up and down completely randomly.

Pair Corralation between NetScout Systems and GE Aerospace

Given the investment horizon of 90 days NetScout Systems is expected to under-perform the GE Aerospace. In addition to that, NetScout Systems is 1.23 times more volatile than GE Aerospace. It trades about -0.03 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.13 per unit of volatility. If you would invest  6,362  in GE Aerospace on October 22, 2024 and sell it today you would earn a total of  11,923  from holding GE Aerospace or generate 187.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NetScout Systems  vs.  GE Aerospace

NetScout Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 3 (%) 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.

GE Aerospace

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NetScout Systems and GE Aerospace

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

The idea behind NetScout Systems and GE Aerospace 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.