Correlation Between Aluminumof China and CyberArk Software

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

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

Diversification Opportunities for Aluminumof China and CyberArk Software

0.68

Correlation Coefficient

Aluminumof China  CyberArk Software

Poor diversification

The 3 months correlation between Aluminumof and CyberArk is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and CyberArk Software go up and down completely randomly.

Pair Corralation between Aluminumof China and CyberArk Software

Assuming the 90 days horizon Aluminum of is expected to generate 1.42 times more return on investment than CyberArk Software. However, Aluminumof China is 1.42 times more volatile than CyberArk Software. It trades about 0.04 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.06 per unit of risk. If you would invest  54.00  in Aluminum of on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Aluminum of or generate 3.7% return on investment over 90 days.

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

Aluminum of  vs.  CyberArk Software

Aluminumof China

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aluminumof China 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 6 (%) 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 Aluminumof China and CyberArk Software

The main advantage of trading using opposite Aluminumof China and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.