Correlation Between Kimball Electronics and NetScout Systems

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

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

Diversification Opportunities for Kimball Electronics and NetScout Systems

0.72

Correlation Coefficient

Kimball Electronics  NetScout Systems

Poor diversification

The 3 months correlation between Kimball and NetScout is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and NetScout Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetScout Systems and Kimball Electronics 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 Kimball Electronics 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 Kimball Electronics i.e., Kimball Electronics and NetScout Systems go up and down completely randomly.

Pair Corralation between Kimball Electronics and NetScout Systems

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 1.02 times more return on investment than NetScout Systems. However, Kimball Electronics is 1.02 times more volatile than NetScout Systems. It trades about 0.03 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.02 per unit of risk. If you would invest  1,783  in Kimball Electronics on September 23, 2024 and sell it today you would earn a total of  54.00  from holding Kimball Electronics or generate 3.03% return on investment over 90 days.

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

Kimball Electronics  vs.  NetScout Systems

Kimball Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Kimball Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NetScout Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NetScout Systems is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kimball Electronics and NetScout Systems

The main advantage of trading using opposite Kimball Electronics and NetScout Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimball Electronics 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 Kimball Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.