Correlation Between Waste Connections and CyberArk Software

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

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

Diversification Opportunities for Waste Connections and CyberArk Software

0.71

Correlation Coefficient

Waste Connections  CyberArk Software

Poor diversification

The 3 months correlation between Waste and CyberArk is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Waste Connections 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 Waste Connections 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 Waste Connections i.e., Waste Connections and CyberArk Software go up and down completely randomly.

Pair Corralation between Waste Connections and CyberArk Software

Assuming the 90 days trading horizon Waste Connections is expected to generate 1.05 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Waste Connections is 2.42 times less risky than CyberArk Software. It trades about 0.13 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30,550  in CyberArk Software on December 28, 2024 and sell it today you would earn a total of  2,390  from holding CyberArk Software or generate 7.82% return on investment over 90 days.

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

Waste Connections  vs.  CyberArk Software

Waste Connections

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CyberArk Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CyberArk Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waste Connections and CyberArk Software

The main advantage of trading using opposite Waste Connections and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Connections 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 Waste Connections 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.