Correlation Between CyberArk Software and CPU SOFTWAREHOUSE

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

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

Diversification Opportunities for CyberArk Software and CPU SOFTWAREHOUSE

0.24

Correlation Coefficient

CyberArk Software  CPU SOFTWAREHOUSE

Modest diversification

The 3 months correlation between CyberArk and CPU is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of CyberArk Software i.e., CyberArk Software and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between CyberArk Software and CPU SOFTWAREHOUSE

Assuming the 90 days trading horizon CyberArk Software is expected to generate 12.54 times less return on investment than CPU SOFTWAREHOUSE. But when comparing it to its historical volatility, CyberArk Software is 2.91 times less risky than CPU SOFTWAREHOUSE. It trades about 0.02 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  89.00  in CPU SOFTWAREHOUSE on December 30, 2024 and sell it today you would earn a total of  19.00  from holding CPU SOFTWAREHOUSE or generate 21.35% return on investment over 90 days.

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

CyberArk Software  vs.  CPU SOFTWAREHOUSE

CyberArk Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CyberArk Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CyberArk Software and CPU SOFTWAREHOUSE

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

The idea behind CyberArk Software and CPU SOFTWAREHOUSE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.