Correlation Between Palo Alto and SentinelOne

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

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

Diversification Opportunities for Palo Alto and SentinelOne

0.87

Correlation Coefficient

Palo Alto  SentinelOne

Very poor diversification

The 3 months correlation between Palo and SentinelOne is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne and Palo Alto 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 Palo Alto Networks are associated (or correlated) with SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of Palo Alto i.e., Palo Alto and SentinelOne go up and down completely randomly.

Pair Corralation between Palo Alto and SentinelOne

Given the investment horizon of 90 days Palo Alto is expected to generate 2.23 times less return on investment than SentinelOne. But when comparing it to its historical volatility, Palo Alto Networks is 1.38 times less risky than SentinelOne. It trades about 0.08 of its potential returns per unit of risk. SentinelOne is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,288  in SentinelOne on September 3, 2024 and sell it today you would earn a total of  507.00  from holding SentinelOne or generate 22.16% return on investment over 90 days.

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

Palo Alto Networks  vs.  SentinelOne

Palo Alto Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SentinelOne

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SentinelOne are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SentinelOne unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palo Alto and SentinelOne

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

The idea behind Palo Alto Networks and SentinelOne 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.