Correlation Between F5 Networks and CyberArk Software

Can any of the company-specific risk be diversified away by investing in both F5 Networks 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 F5 Networks and CyberArk Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between F5 Networks and CyberArk Software, you can compare the effects of market volatilities on F5 Networks 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 F5 Networks with a short position of CyberArk Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of F5 Networks and CyberArk Software.

Diversification Opportunities for F5 Networks and CyberArk Software

0.89

Correlation Coefficient

F5 Networks  CyberArk Software

Very poor diversification

The 3 months correlation between FFIV and CyberArk is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding F5 Networks and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and F5 Networks 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 F5 Networks 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 F5 Networks i.e., F5 Networks and CyberArk Software go up and down completely randomly.

Pair Corralation between F5 Networks and CyberArk Software

Given the investment horizon of 90 days F5 Networks is expected to generate 1.53 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, F5 Networks is 1.28 times less risky than CyberArk Software. It trades about 0.04 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  31,960  in CyberArk Software on December 29, 2024 and sell it today you would earn a total of  2,161  from holding CyberArk Software or generate 6.76% return on investment over 90 days.

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

F5 Networks  vs.  CyberArk Software

F5 Networks

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, F5 Networks is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CyberArk Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 4 (%) 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 April 2025.

Pair Trading with F5 Networks and CyberArk Software

The main advantage of trading using opposite F5 Networks and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F5 Networks 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 F5 Networks 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.