Correlation Between Advanced Medical and CyberArk Software

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

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

Diversification Opportunities for Advanced Medical and CyberArk Software

-0.17

Correlation Coefficient

Advanced Medical  CyberArk Software

Good diversification

The 3 months correlation between Advanced and CyberArk is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and CyberArk Software go up and down completely randomly.

Pair Corralation between Advanced Medical and CyberArk Software

Assuming the 90 days trading horizon Advanced Medical is expected to generate 12.96 times less return on investment than CyberArk Software. In addition to that, Advanced Medical is 1.17 times more volatile than CyberArk Software. It trades about 0.01 of its total potential returns per unit of risk. CyberArk Software is currently generating about 0.09 per unit of volatility. If you would invest  13,520  in CyberArk Software on October 24, 2024 and sell it today you would earn a total of  20,410  from holding CyberArk Software or generate 150.96% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  CyberArk Software

Advanced Medical Sol

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Advanced Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fragile basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Medical and CyberArk Software

The main advantage of trading using opposite Advanced Medical and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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 Advanced Medical Solutions 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.