Correlation Between NETGEAR and NetScout Systems

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

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

Diversification Opportunities for NETGEAR and NetScout Systems

0.6

Correlation Coefficient

NETGEAR  NetScout Systems

Poor diversification

The 3 months correlation between NETGEAR and NetScout is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and NetScout Systems go up and down completely randomly.

Pair Corralation between NETGEAR and NetScout Systems

Given the investment horizon of 90 days NETGEAR is expected to under-perform the NetScout Systems. In addition to that, NETGEAR is 1.37 times more volatile than NetScout Systems. It trades about -0.16 of its total potential returns per unit of risk. NetScout Systems is currently generating about -0.04 per unit of volatility. If you would invest  2,356  in NetScout Systems on May 18, 2025 and sell it today you would lose (115.00) from holding NetScout Systems or give up 4.88% of portfolio value over 90 days.

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

NETGEAR  vs.  NetScout Systems

NETGEAR

Risk-Adjusted Performance

Weakest

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 NETGEAR and NetScout Systems

The main advantage of trading using opposite NETGEAR and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.