Correlation Between Iridium Communications and CyberArk Software

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

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

Diversification Opportunities for Iridium Communications and CyberArk Software

0.56

Correlation Coefficient

Iridium Communications  CyberArk Software

Very weak diversification

The 3 months correlation between Iridium and CyberArk is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Iridium Communications 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 Iridium Communications 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 Iridium Communications i.e., Iridium Communications and CyberArk Software go up and down completely randomly.

Pair Corralation between Iridium Communications and CyberArk Software

Assuming the 90 days horizon Iridium Communications is expected to generate 10.76 times less return on investment than CyberArk Software. In addition to that, Iridium Communications is 1.04 times more volatile than CyberArk Software. It trades about 0.0 of its total potential returns per unit of risk. CyberArk Software is currently generating about 0.02 per unit of volatility. If you would invest  30,550  in CyberArk Software on December 30, 2024 and sell it today you would earn a total of  180.00  from holding CyberArk Software or generate 0.59% return on investment over 90 days.

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

Iridium Communications  vs.  CyberArk Software

Iridium Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iridium Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iridium Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CyberArk Software

Risk-Adjusted Performance

Weak

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

Pair Trading with Iridium Communications and CyberArk Software

The main advantage of trading using opposite Iridium Communications and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications 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 Iridium Communications 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.