Traffic Analytics analyzes the network security group (NSG) flow logs to provide insights into traffic flow in your Azure cloud1. NSG flow logs are a feature of Network Watcher that allows you to view information about ingress and egress IP traffic through an NSG2. To use Traffic Analytics, you need to enable NSG flow logs for the network security groups you want to monitor1.
Diagnostic settings for VM1 or NSG1 are not required for Traffic Analytics. Diagnostic settings are used to stream log data from an Azure resource to different destinations such as Log Analytics workspace, Event Hubs, or Storage account3. Insights for VM1 are also not required for Traffic Analytics. Insights are a feature of Azure Monitor that provide analysis of the performance and health of an Azure resource4.