Correlation Between Radware and Couchbase

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

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

Diversification Opportunities for Radware and Couchbase

0.56

Correlation Coefficient

Radware  Couchbase

Very weak diversification

The 3 months correlation between Radware and Couchbase is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Radware and Couchbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Couchbase and Radware 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 Radware are associated (or correlated) with Couchbase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Couchbase has no effect on the direction of Radware i.e., Radware and Couchbase go up and down completely randomly.

Pair Corralation between Radware and Couchbase

Given the investment horizon of 90 days Radware is expected to generate 0.38 times more return on investment than Couchbase. However, Radware is 2.66 times less risky than Couchbase. It trades about 0.02 of its potential returns per unit of risk. Couchbase is currently generating about -0.18 per unit of risk. If you would invest  2,302  in Radware on September 18, 2024 and sell it today you would earn a total of  8.00  from holding Radware or generate 0.35% return on investment over 90 days.

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

Radware  vs.  Couchbase

Radware

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radware are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Radware may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Couchbase

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Couchbase are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Couchbase exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radware and Couchbase

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

The idea behind Radware and Couchbase 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.