Correlation Between Box and NetScout Systems

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

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

Diversification Opportunities for Box and NetScout Systems

0.47

Correlation Coefficient

Box  NetScout Systems

Very weak diversification

The 3 months correlation between Box and NetScout is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Box Inc and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Box 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 Box 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 Box i.e., Box and NetScout Systems go up and down completely randomly.

Pair Corralation between Box and NetScout Systems

Considering the 90-day investment horizon Box Inc is expected to generate 0.76 times more return on investment than NetScout Systems. However, Box Inc is 1.31 times less risky than NetScout Systems. It trades about 0.03 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.01 per unit of risk. If you would invest  2,537  in Box Inc on February 22, 2024 and sell it today you would earn a total of  68.00  from holding Box Inc or generate 2.68% return on investment over 90 days.

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

Box Inc  vs.  NetScout Systems

Box Inc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Box Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Box is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Box and NetScout Systems

The main advantage of trading using opposite Box and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Box 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 Box 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.