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

0.32

Correlation Coefficient

Sterling Check  NetScout Systems

Weak diversification

The 3 months correlation between Sterling and NetScout is 0.32. 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 0.52 times more return on investment than NetScout Systems. However, Sterling Check Corp is 1.91 times less risky than NetScout Systems. It trades about 0.08 of its potential returns per unit of risk. NetScout Systems is currently generating about 0.03 per unit of risk. If you would invest  1,619  in Sterling Check Corp on August 30, 2024 and sell it today you would earn a total of  55.00  from holding Sterling Check Corp or generate 3.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	69.84%
Values	Daily Returns

Sterling Check Corp  vs.  NetScout Systems

Sterling Check Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Sterling Check Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Sterling Check is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

NetScout Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetScout Systems are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.