Correlation Between Varonis Systems and Crowdstrike Holdings

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

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

Diversification Opportunities for Varonis Systems and Crowdstrike Holdings

-0.75

Correlation Coefficient

Varonis Systems  Crowdstrike Holdings

Pay attention - limited upside

The 3 months correlation between Varonis and Crowdstrike is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Varonis Systems and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings and Varonis Systems 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 Varonis Systems are associated (or correlated) with Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of Varonis Systems i.e., Varonis Systems and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between Varonis Systems and Crowdstrike Holdings

Given the investment horizon of 90 days Varonis Systems is expected to under-perform the Crowdstrike Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Varonis Systems is 2.27 times less risky than Crowdstrike Holdings. The stock trades about -0.53 of its potential returns per unit of risk. The Crowdstrike Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  36,416  in Crowdstrike Holdings on October 5, 2024 and sell it today you would lose (1,682) from holding Crowdstrike Holdings or give up 4.62% of portfolio value over 90 days.

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

Varonis Systems  vs.  Crowdstrike Holdings

Varonis Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varonis Systems 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Crowdstrike Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crowdstrike Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Crowdstrike Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varonis Systems and Crowdstrike Holdings

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

The idea behind Varonis Systems and Crowdstrike Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.