Correlation Between NetScout Systems and Amphenol

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

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

Diversification Opportunities for NetScout Systems and Amphenol

-0.26

Correlation Coefficient

NetScout Systems  Amphenol

Very good diversification

The 3 months correlation between NetScout and Amphenol is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Amphenol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphenol and NetScout Systems 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 NetScout Systems are associated (or correlated) with Amphenol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphenol has no effect on the direction of NetScout Systems i.e., NetScout Systems and Amphenol go up and down completely randomly.

Pair Corralation between NetScout Systems and Amphenol

Given the investment horizon of 90 days NetScout Systems is expected to under-perform the Amphenol. In addition to that, NetScout Systems is 1.98 times more volatile than Amphenol. It trades about -0.01 of its total potential returns per unit of risk. Amphenol is currently generating about 0.33 per unit of volatility. If you would invest  10,788  in Amphenol on February 26, 2024 and sell it today you would earn a total of  2,836  from holding Amphenol or generate 26.29% return on investment over 90 days.

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

NetScout Systems  vs.  Amphenol

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.

Amphenol

Risk-Adjusted Performance

25 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and Amphenol

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

The idea behind NetScout Systems and Amphenol 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.