Correlation Between NetScout Systems and Linde Plc

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

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

Diversification Opportunities for NetScout Systems and Linde Plc

0.36

Correlation Coefficient

NetScout Systems  Linde Plc

Weak diversification

The 3 months correlation between NetScout and Linde is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of NetScout Systems i.e., NetScout Systems and Linde Plc go up and down completely randomly.

Pair Corralation between NetScout Systems and Linde Plc

Given the investment horizon of 90 days NetScout Systems is expected to generate 8.97 times less return on investment than Linde Plc. In addition to that, NetScout Systems is 2.33 times more volatile than Linde plc Ordinary. It trades about 0.01 of its total potential returns per unit of risk. Linde plc Ordinary is currently generating about 0.15 per unit of volatility. If you would invest  42,093  in Linde plc Ordinary on December 21, 2024 and sell it today you would earn a total of  3,682  from holding Linde plc Ordinary or generate 8.75% return on investment over 90 days.

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

NetScout Systems  vs.  Linde plc Ordinary

NetScout Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days NetScout Systems has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Linde plc Ordinary

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc Ordinary are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Linde Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NetScout Systems and Linde Plc

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

The idea behind NetScout Systems and Linde plc Ordinary 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.