Correlation Between Rapid7 and NetScout Systems

Can any of the company-specific risk be diversified away by investing in both Rapid7 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 Rapid7 and NetScout Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rapid7 Inc and NetScout Systems, you can compare the effects of market volatilities on Rapid7 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 Rapid7 with a short position of NetScout Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rapid7 and NetScout Systems.

Diversification Opportunities for Rapid7 and NetScout Systems

0.32

Correlation Coefficient

Rapid7  NetScout Systems

Weak diversification

The 3 months correlation between Rapid7 and NetScout is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rapid7 Inc and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Rapid7 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 Rapid7 Inc 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 Rapid7 i.e., Rapid7 and NetScout Systems go up and down completely randomly.

Pair Corralation between Rapid7 and NetScout Systems

Considering the 90-day investment horizon Rapid7 Inc is expected to under-perform the NetScout Systems. But the stock apears to be less risky and, when comparing its historical volatility, Rapid7 Inc is 1.03 times less risky than NetScout Systems. The stock trades about -0.26 of its potential returns per unit of risk. The NetScout Systems is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,150  in NetScout Systems on December 29, 2024 and sell it today you would earn a total of  24.00  from holding NetScout Systems or generate 1.12% return on investment over 90 days.

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

Rapid7 Inc  vs.  NetScout Systems

Rapid7 Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rapid7 Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NetScout Systems

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 1 (%) 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.

Pair Trading with Rapid7 and NetScout Systems

The main advantage of trading using opposite Rapid7 and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rapid7 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 Rapid7 Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.