Correlation Between NetScout Systems and KVH Industries

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

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

Diversification Opportunities for NetScout Systems and KVH Industries

0.52

Correlation Coefficient

NetScout Systems  KVH Industries

Very weak diversification

The 3 months correlation between NetScout and KVH is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries 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 KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of NetScout Systems i.e., NetScout Systems and KVH Industries go up and down completely randomly.

Pair Corralation between NetScout Systems and KVH Industries

Given the investment horizon of 90 days NetScout Systems is expected to generate 0.76 times more return on investment than KVH Industries. However, NetScout Systems is 1.31 times less risky than KVH Industries. It trades about -0.01 of its potential returns per unit of risk. KVH Industries is currently generating about -0.03 per unit of risk. If you would invest  2,744  in NetScout Systems on October 5, 2024 and sell it today you would lose (576.00) from holding NetScout Systems or give up 20.99% of portfolio value over 90 days.

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

NetScout Systems  vs.  KVH Industries

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.

KVH Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and KVH Industries

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

The idea behind NetScout Systems and KVH Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.