Correlation Between Akamai Technologies and Crowdstrike Holdings

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

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

Diversification Opportunities for Akamai Technologies and Crowdstrike Holdings

-0.56

Correlation Coefficient

Akamai Technologies  Crowdstrike Holdings

Excellent diversification

The 3 months correlation between Akamai and Crowdstrike is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings and Akamai Technologies 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 Akamai Technologies are associated (or correlated) with Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between Akamai Technologies and Crowdstrike Holdings

Given the investment horizon of 90 days Akamai Technologies is expected to under-perform the Crowdstrike Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies is 1.61 times less risky than Crowdstrike Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Crowdstrike Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21,235  in Crowdstrike Holdings on September 23, 2024 and sell it today you would earn a total of  14,994  from holding Crowdstrike Holdings or generate 70.61% return on investment over 90 days.

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

Akamai Technologies  vs.  Crowdstrike Holdings

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akamai Technologies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Crowdstrike Holdings

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Akamai Technologies and Crowdstrike Holdings

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

The idea behind Akamai Technologies and Crowdstrike Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.