Correlation Between Check Point and NetScout Systems

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

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

Diversification Opportunities for Check Point and NetScout Systems

-0.23

Correlation Coefficient

Check Point  NetScout Systems

Very good diversification

The 3 months correlation between Check and NetScout is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Check Point 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 Check Point Software 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 Check Point i.e., Check Point and NetScout Systems go up and down completely randomly.

Pair Corralation between Check Point and NetScout Systems

Given the investment horizon of 90 days Check Point Software is expected to under-perform the NetScout Systems. In addition to that, Check Point is 1.09 times more volatile than NetScout Systems. It trades about -0.02 of its total potential returns per unit of risk. NetScout Systems is currently generating about 0.05 per unit of volatility. If you would invest  2,071  in NetScout Systems on September 3, 2024 and sell it today you would earn a total of  117.00  from holding NetScout Systems or generate 5.65% return on investment over 90 days.

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

Check Point Software  vs.  NetScout Systems

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

NetScout Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 4 (%) 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 January 2025.

Pair Trading with Check Point and NetScout Systems

The main advantage of trading using opposite Check Point and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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 Check Point Software 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 Commodity Directory module to find actively traded commodities issued by global exchanges.