Correlation Between Rapid7 and SentinelOne

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

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

Diversification Opportunities for Rapid7 and SentinelOne

0.84

Correlation Coefficient

Rapid7  SentinelOne

Very poor diversification

The 3 months correlation between Rapid7 and SentinelOne is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rapid7 Inc and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 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 Rapid7 i.e., Rapid7 and SentinelOne go up and down completely randomly.

Pair Corralation between Rapid7 and SentinelOne

Considering the 90-day investment horizon Rapid7 is expected to generate 2.56 times less return on investment than SentinelOne. But when comparing it to its historical volatility, Rapid7 Inc is 1.06 times less risky than SentinelOne. It trades about 0.06 of its potential returns per unit of risk. SentinelOne is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,734  in SentinelOne on September 3, 2024 and sell it today you would earn a total of  1,061  from holding SentinelOne or generate 61.19% return on investment over 90 days.

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

Rapid7 Inc  vs.  SentinelOne

Rapid7 Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid7 Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Rapid7 exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Rapid7 and SentinelOne

The main advantage of trading using opposite Rapid7 and SentinelOne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rapid7 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 Rapid7 Inc 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.