Correlation Between NetScout Systems and Edgio

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

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

Diversification Opportunities for NetScout Systems and Edgio

-0.41

Correlation Coefficient

NetScout Systems  Edgio

Very good diversification

The 3 months correlation between NetScout and Edgio is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NetScout Systems and Edgio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgio Inc and NetScout Systems 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 NetScout Systems are associated (or correlated) with Edgio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgio Inc has no effect on the direction of NetScout Systems i.e., NetScout Systems and Edgio go up and down completely randomly.

Pair Corralation between NetScout Systems and Edgio

Given the investment horizon of 90 days NetScout Systems is expected to under-perform the Edgio. But the stock apears to be less risky and, when comparing its historical volatility, NetScout Systems is 37.19 times less risky than Edgio. The stock trades about -0.03 of its potential returns per unit of risk. The Edgio Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,480  in Edgio Inc on September 23, 2024 and sell it today you would lose (4,478) from holding Edgio Inc or give up 99.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.57%
Values	Daily Returns

NetScout Systems  vs.  Edgio Inc

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.

Edgio Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Edgio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak forward indicators, Edgio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetScout Systems and Edgio

The main advantage of trading using opposite NetScout Systems and Edgio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetScout Systems position performs unexpectedly, Edgio 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 Edgio will offset losses from the drop in Edgio's long position.

The idea behind NetScout Systems and Edgio Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.