Correlation Between AstroNova and NetScout Systems

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

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

Diversification Opportunities for AstroNova and NetScout Systems

0.05

Correlation Coefficient

AstroNova  NetScout Systems

Significant diversification

The 3 months correlation between AstroNova and NetScout is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AstroNova and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and AstroNova 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 AstroNova 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 AstroNova i.e., AstroNova and NetScout Systems go up and down completely randomly.

Pair Corralation between AstroNova and NetScout Systems

Given the investment horizon of 90 days AstroNova is expected to generate 0.99 times more return on investment than NetScout Systems. However, AstroNova is 1.01 times less risky than NetScout Systems. It trades about 0.04 of its potential returns per unit of risk. NetScout Systems is currently generating about -0.03 per unit of risk. If you would invest  1,267  in AstroNova on January 25, 2024 and sell it today you would earn a total of  453.00  from holding AstroNova or generate 35.75% return on investment over 90 days.

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

AstroNova  vs.  NetScout Systems

AstroNova

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstroNova has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AstroNova is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 latest unfluctuating 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 AstroNova and NetScout Systems

The main advantage of trading using opposite AstroNova and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstroNova 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 AstroNova 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.