Correlation Between Rapid7 and Cognyte Software

Can any of the company-specific risk be diversified away by investing in both Rapid7 and Cognyte 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 Rapid7 and Cognyte Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rapid7 Inc and Cognyte Software, you can compare the effects of market volatilities on Rapid7 and Cognyte 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 Rapid7 with a short position of Cognyte Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rapid7 and Cognyte Software.

Diversification Opportunities for Rapid7 and Cognyte Software

0.46

Correlation Coefficient

Rapid7  Cognyte Software

Very weak diversification

The 3 months correlation between Rapid7 and Cognyte is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Rapid7 Inc and Cognyte Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognyte Software and Rapid7 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 Rapid7 Inc are associated (or correlated) with Cognyte Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognyte Software has no effect on the direction of Rapid7 i.e., Rapid7 and Cognyte Software go up and down completely randomly.

Pair Corralation between Rapid7 and Cognyte Software

Considering the 90-day investment horizon Rapid7 Inc is expected to under-perform the Cognyte Software. But the stock apears to be less risky and, when comparing its historical volatility, Rapid7 Inc is 1.18 times less risky than Cognyte Software. The stock trades about -0.26 of its potential returns per unit of risk. The Cognyte Software is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  860.00  in Cognyte Software on December 29, 2024 and sell it today you would lose (50.00) from holding Cognyte Software or give up 5.81% of portfolio value over 90 days.

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

Rapid7 Inc  vs.  Cognyte Software

Rapid7 Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rapid7 Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cognyte Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognyte Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cognyte Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rapid7 and Cognyte Software

The main advantage of trading using opposite Rapid7 and Cognyte Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rapid7 position performs unexpectedly, Cognyte 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 Cognyte Software will offset losses from the drop in Cognyte Software's long position.

The idea behind Rapid7 Inc and Cognyte 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..