Correlation Between CyberArk Software and Amdocs

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

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

Diversification Opportunities for CyberArk Software and Amdocs

0.49

Correlation Coefficient

CyberArk Software  Amdocs

Very weak diversification

The 3 months correlation between CyberArk and Amdocs is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and Amdocs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amdocs 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 Amdocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amdocs has no effect on the direction of CyberArk Software i.e., CyberArk Software and Amdocs go up and down completely randomly.

Pair Corralation between CyberArk Software and Amdocs

Given the investment horizon of 90 days CyberArk Software is expected to generate 2.21 times more return on investment than Amdocs. However, CyberArk Software is 2.21 times more volatile than Amdocs. It trades about 0.13 of its potential returns per unit of risk. Amdocs is currently generating about 0.05 per unit of risk. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CyberArk Software  vs.  Amdocs

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.

Amdocs

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amdocs are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Amdocs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CyberArk Software and Amdocs

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

The idea behind CyberArk Software and Amdocs 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.