Correlation Between Compagnie and CyberArk Software

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

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

Diversification Opportunities for Compagnie and CyberArk Software

0.55

Correlation Coefficient

Compagnie  CyberArk Software

Very weak diversification

The 3 months correlation between Compagnie and CyberArk is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and CyberArk Software go up and down completely randomly.

Pair Corralation between Compagnie and CyberArk Software

Assuming the 90 days horizon Compagnie is expected to generate 11.11 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.99 times less risky than CyberArk Software. It trades about 0.03 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  27,180  in CyberArk Software on October 7, 2024 and sell it today you would earn a total of  5,550  from holding CyberArk Software or generate 20.42% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  CyberArk Software

Compagnie de Saint

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Compagnie de Saint Gobain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Compagnie 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

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and CyberArk Software

The main advantage of trading using opposite Compagnie and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.