Correlation Between AvidXchange Holdings and CyberArk Software

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

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

Diversification Opportunities for AvidXchange Holdings and CyberArk Software

-0.61

Correlation Coefficient

AvidXchange Holdings  CyberArk Software

Excellent diversification

The 3 months correlation between AvidXchange and CyberArk is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AvidXchange Holdings and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and AvidXchange Holdings 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 AvidXchange Holdings 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 AvidXchange Holdings i.e., AvidXchange Holdings and CyberArk Software go up and down completely randomly.

Pair Corralation between AvidXchange Holdings and CyberArk Software

Given the investment horizon of 90 days AvidXchange Holdings is expected to under-perform the CyberArk Software. But the stock apears to be less risky and, when comparing its historical volatility, AvidXchange Holdings is 1.19 times less risky than CyberArk Software. The stock trades about -0.21 of its potential returns per unit of risk. The CyberArk Software is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  32,351  in CyberArk Software on November 28, 2024 and sell it today you would earn a total of  5,122  from holding CyberArk Software or generate 15.83% return on investment over 90 days.

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

AvidXchange Holdings  vs.  CyberArk Software

AvidXchange Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days AvidXchange Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CyberArk Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental drivers, CyberArk Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvidXchange Holdings and CyberArk Software

The main advantage of trading using opposite AvidXchange Holdings and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvidXchange Holdings 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 AvidXchange Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.