Correlation Between PennantPark Investment and CyberArk Software

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

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

Diversification Opportunities for PennantPark Investment and CyberArk Software

0.82

Correlation Coefficient

PennantPark Investment  CyberArk Software

Very poor diversification

The 3 months correlation between PennantPark and CyberArk is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and PennantPark Investment 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 PennantPark Investment are associated (or correlated) with CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and CyberArk Software go up and down completely randomly.

Pair Corralation between PennantPark Investment and CyberArk Software

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.78 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, PennantPark Investment is 1.19 times less risky than CyberArk Software. It trades about 0.07 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,515  in CyberArk Software on October 22, 2024 and sell it today you would earn a total of  22,375  from holding CyberArk Software or generate 178.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

PennantPark Investment  vs.  CyberArk Software

PennantPark Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PennantPark Investment reported solid returns over the last few months and may actually be approaching a breakup point.

CyberArk Software

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and CyberArk Software

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

The idea behind PennantPark Investment and CyberArk Software 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.