Correlation Between Sterling Check and NetScout Systems

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

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

Diversification Opportunities for Sterling Check and NetScout Systems

0.78

Correlation Coefficient

Sterling Check  NetScout Systems

Poor diversification

The 3 months correlation between Sterling and NetScout is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Check Corp and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Sterling Check 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 Sterling Check Corp 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 Sterling Check i.e., Sterling Check and NetScout Systems go up and down completely randomly.

Pair Corralation between Sterling Check and NetScout Systems

Given the investment horizon of 90 days Sterling Check Corp is expected to generate 0.95 times more return on investment than NetScout Systems. However, Sterling Check Corp is 1.05 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 0.0 per unit of risk. If you would invest  1,319  in Sterling Check Corp on July 8, 2024 and sell it today you would earn a total of  347.00  from holding Sterling Check Corp or generate 26.31% return on investment over 90 days.

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

Sterling Check Corp  vs.  NetScout Systems

Sterling Check Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Check Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Sterling Check may actually be approaching a critical reversion point that can send shares even higher in November 2024.

NetScout Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, NetScout Systems may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Sterling Check and NetScout Systems

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