Correlation Between CyberArk Software and Trane Technologies

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

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

Diversification Opportunities for CyberArk Software and Trane Technologies

0.18

Correlation Coefficient

CyberArk Software  Trane Technologies

Average diversification

The 3 months correlation between CyberArk and Trane is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc and CyberArk 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 CyberArk Software are associated (or correlated) with Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of CyberArk Software i.e., CyberArk Software and Trane Technologies go up and down completely randomly.

Pair Corralation between CyberArk Software and Trane Technologies

Assuming the 90 days trading horizon CyberArk Software is expected to generate 2.11 times more return on investment than Trane Technologies. However, CyberArk Software is 2.11 times more volatile than Trane Technologies plc. It trades about 0.27 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.13 per unit of risk. If you would invest  29,350  in CyberArk Software on October 11, 2024 and sell it today you would earn a total of  3,620  from holding CyberArk Software or generate 12.33% return on investment over 90 days.

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

CyberArk Software  vs.  Trane Technologies plc

CyberArk Software

Risk-Adjusted Performance

10 of 100

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. 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.

Trane Technologies plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Trane Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CyberArk Software and Trane Technologies

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

The idea behind CyberArk Software and Trane Technologies plc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.