Correlation Between Cognyte Software and Rapid7

Can any of the company-specific risk be diversified away by investing in both Cognyte Software and Rapid7 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 Cognyte Software and Rapid7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cognyte Software and Rapid7 Inc, you can compare the effects of market volatilities on Cognyte Software and Rapid7 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 Cognyte Software with a short position of Rapid7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognyte Software and Rapid7.

Diversification Opportunities for Cognyte Software and Rapid7

0.29

Correlation Coefficient

Cognyte Software  Rapid7

Modest diversification

The 3 months correlation between Cognyte and Rapid7 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cognyte Software and Rapid7 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapid7 Inc and Cognyte Software 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 Cognyte Software are associated (or correlated) with Rapid7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapid7 Inc has no effect on the direction of Cognyte Software i.e., Cognyte Software and Rapid7 go up and down completely randomly.

Pair Corralation between Cognyte Software and Rapid7

Given the investment horizon of 90 days Cognyte Software is expected to generate 1.61 times more return on investment than Rapid7. However, Cognyte Software is 1.61 times more volatile than Rapid7 Inc. It trades about 0.28 of its potential returns per unit of risk. Rapid7 Inc is currently generating about 0.1 per unit of risk. If you would invest  658.00  in Cognyte Software on August 30, 2024 and sell it today you would earn a total of  135.00  from holding Cognyte Software or generate 20.52% return on investment over 90 days.

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

Cognyte Software  vs.  Rapid7 Inc

Cognyte Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cognyte Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cognyte Software may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Rapid7 Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid7 Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Rapid7 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognyte Software and Rapid7

The main advantage of trading using opposite Cognyte Software and Rapid7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognyte Software position performs unexpectedly, Rapid7 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 Rapid7 will offset losses from the drop in Rapid7's long position.

The idea behind Cognyte Software and Rapid7 Inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.