Correlation Between ExlService Holdings and NetScout Systems

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

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

Diversification Opportunities for ExlService Holdings and NetScout Systems

0.43

Correlation Coefficient

ExlService Holdings  NetScout Systems

Very weak diversification

The 3 months correlation between ExlService and NetScout is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and ExlService Holdings 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 ExlService Holdings 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 ExlService Holdings i.e., ExlService Holdings and NetScout Systems go up and down completely randomly.

Pair Corralation between ExlService Holdings and NetScout Systems

Given the investment horizon of 90 days ExlService Holdings is expected to under-perform the NetScout Systems. But the stock apears to be less risky and, when comparing its historical volatility, ExlService Holdings is 1.04 times less risky than NetScout Systems. The stock trades about -0.05 of its potential returns per unit of risk. The NetScout Systems is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,315  in NetScout Systems on May 15, 2025 and sell it today you would earn a total of  2.00  from holding NetScout Systems or generate 0.09% return on investment over 90 days.

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

ExlService Holdings  vs.  NetScout Systems

ExlService Holdings

Risk-Adjusted Performance

Weakest

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

NetScout Systems

Risk-Adjusted Performance

Weakest

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 ExlService Holdings and NetScout Systems

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

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.