Correlation Between Wex and NetScout Systems

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

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

Diversification Opportunities for Wex and NetScout Systems

0.12

Correlation Coefficient

Wex  NetScout Systems

Average diversification

The 3 months correlation between Wex and NetScout is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Wex 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 Wex 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 Wex i.e., Wex and NetScout Systems go up and down completely randomly.

Pair Corralation between Wex and NetScout Systems

Considering the 90-day investment horizon Wex Inc is expected to under-perform the NetScout Systems. But the stock apears to be less risky and, when comparing its historical volatility, Wex Inc is 1.01 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 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,161  in NetScout Systems on February 23, 2024 and sell it today you would lose (18.00) from holding NetScout Systems or give up 0.83% of portfolio value over 90 days.

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

Wex Inc  vs.  NetScout Systems

Wex Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wex Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NetScout Systems

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Wex and NetScout Systems

The main advantage of trading using opposite Wex and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex 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 Wex 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.