Correlation Between STEEL DYNAMICS and CyberArk Software

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

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

Diversification Opportunities for STEEL DYNAMICS and CyberArk Software

0.03

Correlation Coefficient

STEEL DYNAMICS  CyberArk Software

Significant diversification

The 3 months correlation between STEEL and CyberArk is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and CyberArk Software go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and CyberArk Software

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to under-perform the CyberArk Software. But the stock apears to be less risky and, when comparing its historical volatility, STEEL DYNAMICS is 1.33 times less risky than CyberArk Software. The stock trades about -0.03 of its potential returns per unit of risk. The CyberArk Software is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  24,940  in CyberArk Software on October 8, 2024 and sell it today you would earn a total of  7,790  from holding CyberArk Software or generate 31.23% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  CyberArk Software

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 STEEL DYNAMICS and CyberArk Software

The main advantage of trading using opposite STEEL DYNAMICS and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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 STEEL DYNAMICS 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 Global Correlations module to find global opportunities by holding instruments from different markets.