Correlation Between Payfare and NetScout Systems

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

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

Diversification Opportunities for Payfare and NetScout Systems

0.4

Correlation Coefficient

Payfare  NetScout Systems

Very weak diversification

The 3 months correlation between Payfare and NetScout is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Payfare and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Payfare 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 Payfare are associated (or correlated) with NetScout Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetScout Systems has no effect on the direction of Payfare i.e., Payfare and NetScout Systems go up and down completely randomly.

Pair Corralation between Payfare and NetScout Systems

Assuming the 90 days horizon Payfare is expected to generate 4.41 times more return on investment than NetScout Systems. However, Payfare is 4.41 times more volatile than NetScout Systems. It trades about 0.15 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.05 per unit of risk. If you would invest  143.00  in Payfare on November 28, 2024 and sell it today you would earn a total of  135.00  from holding Payfare or generate 94.41% return on investment over 90 days.

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

Payfare  vs.  NetScout Systems

Payfare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payfare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Payfare reported solid returns over the last few months and may actually be approaching a breakup point.

NetScout Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 4 (%) 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 March 2025.

Pair Trading with Payfare and NetScout Systems

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

The idea behind Payfare and NetScout Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.