Correlation Between CyberArk Software and Toho Co

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

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

Diversification Opportunities for CyberArk Software and Toho Co

0.36

Correlation Coefficient

CyberArk Software  Toho Co

Weak diversification

The 3 months correlation between CyberArk and Toho is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and Toho Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toho Co 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 Toho Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toho Co has no effect on the direction of CyberArk Software i.e., CyberArk Software and Toho Co go up and down completely randomly.

Pair Corralation between CyberArk Software and Toho Co

Assuming the 90 days trading horizon CyberArk Software is expected to generate 1.56 times more return on investment than Toho Co. However, CyberArk Software is 1.56 times more volatile than Toho Co. It trades about 0.15 of its potential returns per unit of risk. Toho Co is currently generating about 0.15 per unit of risk. If you would invest  27,100  in CyberArk Software on October 24, 2024 and sell it today you would earn a total of  6,830  from holding CyberArk Software or generate 25.2% 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.  Toho Co

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.

Toho Co

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toho Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Toho Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CyberArk Software and Toho Co

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

The idea behind CyberArk Software and Toho Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.