Correlation Between DigitalOcean Holdings and CyberArk Software

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

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

Diversification Opportunities for DigitalOcean Holdings and CyberArk Software

-0.39

Correlation Coefficient

DigitalOcean Holdings  CyberArk Software

Very good diversification

The 3 months correlation between DigitalOcean and CyberArk is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DigitalOcean Holdings and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and DigitalOcean Holdings 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 DigitalOcean Holdings 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 DigitalOcean Holdings i.e., DigitalOcean Holdings and CyberArk Software go up and down completely randomly.

Pair Corralation between DigitalOcean Holdings and CyberArk Software

Given the investment horizon of 90 days DigitalOcean Holdings is expected to under-perform the CyberArk Software. In addition to that, DigitalOcean Holdings is 1.21 times more volatile than CyberArk Software. It trades about -0.19 of its total potential returns per unit of risk. CyberArk Software is currently generating about -0.03 per unit of volatility. If you would invest  32,437  in CyberArk Software on September 24, 2024 and sell it today you would lose (522.00) from holding CyberArk Software or give up 1.61% of portfolio value over 90 days.

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

DigitalOcean Holdings  vs.  CyberArk Software

DigitalOcean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigitalOcean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CyberArk Software

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental drivers, CyberArk Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DigitalOcean Holdings and CyberArk Software

The main advantage of trading using opposite DigitalOcean Holdings and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DigitalOcean Holdings 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 DigitalOcean Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.