Correlation Between Applied Materials and CyberArk Software
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and CyberArk Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and CyberArk Software, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of CyberArk Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and CyberArk Software.
Diversification Opportunities for Applied Materials and CyberArk Software
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and CyberArk is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and CyberArk Software go up and down completely randomly.
Pair Corralation between Applied Materials and CyberArk Software
Assuming the 90 days horizon Applied Materials is expected to generate 1.5 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Applied Materials is 1.15 times less risky than CyberArk Software. It trades about 0.21 of its potential returns per unit of risk. 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. CyberArk Software
Performance |
| Timeline |
| Applied Materials |
| CyberArk Software |
Applied Materials and CyberArk Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and CyberArk Software
The main advantage of trading using opposite Applied Materials and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Acadia Healthcare | Applied Materials vs. CHRYSALIS INVESTMENTS LTD | Applied Materials vs. PennantPark Investment | Applied Materials vs. Japan Asia Investment |
| CyberArk Software vs. Playtech plc | CyberArk Software vs. ARISTOCRAT LEISURE | CyberArk Software vs. Chesapeake Utilities | CyberArk Software vs. PLAYMATES TOYS |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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