Correlation Between NetScout Systems and TransAct Technologies

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

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

Diversification Opportunities for NetScout Systems and TransAct Technologies

-0.39

Correlation Coefficient

NetScout Systems  TransAct Technologies

Very good diversification

The 3 months correlation between NetScout and TransAct is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and TransAct Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAct Technologies 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 TransAct Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAct Technologies has no effect on the direction of NetScout Systems i.e., NetScout Systems and TransAct Technologies go up and down completely randomly.

Pair Corralation between NetScout Systems and TransAct Technologies

Given the investment horizon of 90 days NetScout Systems is expected to generate 0.98 times more return on investment than TransAct Technologies. However, NetScout Systems is 1.02 times less risky than TransAct Technologies. It trades about 0.07 of its potential returns per unit of risk. TransAct Technologies Incorporated is currently generating about -0.06 per unit of risk. If you would invest  2,013  in NetScout Systems on October 7, 2024 and sell it today you would earn a total of  155.00  from holding NetScout Systems or generate 7.7% return on investment over 90 days.

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

NetScout Systems  vs.  TransAct Technologies Incorpor

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.

TransAct Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransAct Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NetScout Systems and TransAct Technologies

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

The idea behind NetScout Systems and TransAct Technologies Incorporated 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.