Correlation Between WESTERN DIGITAL and CyberArk Software

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

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

Diversification Opportunities for WESTERN DIGITAL and CyberArk Software

0.27

Correlation Coefficient

WESTERN DIGITAL  CyberArk Software

Modest diversification

The 3 months correlation between WESTERN and CyberArk is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding WESTERN DIGITAL and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and WESTERN DIGITAL 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 WESTERN DIGITAL 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 WESTERN DIGITAL i.e., WESTERN DIGITAL and CyberArk Software go up and down completely randomly.

Pair Corralation between WESTERN DIGITAL and CyberArk Software

Assuming the 90 days trading horizon WESTERN DIGITAL is expected to under-perform the CyberArk Software. But the stock apears to be less risky and, when comparing its historical volatility, WESTERN DIGITAL is 1.09 times less risky than CyberArk Software. The stock trades about -0.17 of its potential returns per unit of risk. The CyberArk Software is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  29,350  in CyberArk Software on October 11, 2024 and sell it today you would earn a total of  3,620  from holding CyberArk Software or generate 12.33% return on investment over 90 days.

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

WESTERN DIGITAL  vs.  CyberArk Software

WESTERN DIGITAL

Risk-Adjusted Performance

4 of 100

Insignificant

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

CyberArk Software

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with WESTERN DIGITAL and CyberArk Software

The main advantage of trading using opposite WESTERN DIGITAL and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESTERN DIGITAL 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 WESTERN DIGITAL 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.