Correlation Between Dairy Farm and CyberArk Software

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

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

Diversification Opportunities for Dairy Farm and CyberArk Software

0.28

Correlation Coefficient

Dairy Farm  CyberArk Software

Modest diversification

The 3 months correlation between Dairy and CyberArk is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Dairy Farm 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 Dairy Farm International are associated (or correlated) with CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of Dairy Farm i.e., Dairy Farm and CyberArk Software go up and down completely randomly.

Pair Corralation between Dairy Farm and CyberArk Software

Assuming the 90 days trading horizon Dairy Farm is expected to generate 10.1 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Dairy Farm International is 1.07 times less risky than CyberArk Software. It trades about 0.0 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  31,120  in CyberArk Software on December 24, 2024 and sell it today you would earn a total of  820.00  from holding CyberArk Software or generate 2.63% return on investment over 90 days.

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

Dairy Farm International  vs.  CyberArk Software

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dairy Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CyberArk Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dairy Farm and CyberArk Software

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

The idea behind Dairy Farm International and CyberArk Software 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.

Check out your portfolio center.

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.