Correlation Between Zscaler and CyberArk Software

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

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

Diversification Opportunities for Zscaler and CyberArk Software

0.35

Correlation Coefficient

Zscaler  CyberArk Software

Weak diversification

The 3 months correlation between Zscaler and CyberArk is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Zscaler 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 Zscaler 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 Zscaler i.e., Zscaler and CyberArk Software go up and down completely randomly.

Pair Corralation between Zscaler and CyberArk Software

Allowing for the 90-day total investment horizon Zscaler is expected to generate 5.11 times less return on investment than CyberArk Software. In addition to that, Zscaler is 1.09 times more volatile than CyberArk Software. It trades about 0.03 of its total potential returns per unit of risk. CyberArk Software is currently generating about 0.16 per unit of volatility. If you would invest  28,775  in CyberArk Software on November 27, 2024 and sell it today you would earn a total of  8,243  from holding CyberArk Software or generate 28.65% return on investment over 90 days.

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

Zscaler  vs.  CyberArk Software

Zscaler

Risk-Adjusted Performance

Very Weak

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

CyberArk Software

Risk-Adjusted Performance

Good

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. Even with relatively abnormal fundamental drivers, CyberArk Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zscaler and CyberArk Software

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

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.