Correlation Between CSG Systems and NetScout Systems

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

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

Diversification Opportunities for CSG Systems and NetScout Systems

0.75

Correlation Coefficient

CSG Systems  NetScout Systems

Poor diversification

The 3 months correlation between CSG and NetScout is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CSG Systems International and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and CSG 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 CSG Systems International 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 CSG Systems i.e., CSG Systems and NetScout Systems go up and down completely randomly.

Pair Corralation between CSG Systems and NetScout Systems

Given the investment horizon of 90 days CSG Systems is expected to generate 2.75 times less return on investment than NetScout Systems. But when comparing it to its historical volatility, CSG Systems International is 1.06 times less risky than NetScout Systems. It trades about 0.06 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,983  in NetScout Systems on April 21, 2025 and sell it today you would earn a total of  321.00  from holding NetScout Systems or generate 16.19% return on investment over 90 days.

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

CSG Systems International  vs.  NetScout Systems

CSG Systems International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSG Systems International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CSG Systems 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, NetScout Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSG Systems and NetScout Systems

The main advantage of trading using opposite CSG Systems and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSG Systems 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 CSG Systems International 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.