Correlation Between Beta Systems and CyberArk Software

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Can any of the company-specific risk be diversified away by investing in both Beta Systems 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 Beta Systems and CyberArk Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beta Systems Software and CyberArk Software, you can compare the effects of market volatilities on Beta Systems 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 Beta Systems with a short position of CyberArk Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beta Systems and CyberArk Software.

Diversification Opportunities for Beta Systems and CyberArk Software

BetaCyberArkDiversified AwayBetaCyberArkDiversified Away100%
0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Beta and CyberArk is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Beta Systems Software and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Beta 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 Beta Systems Software 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 Beta Systems i.e., Beta Systems and CyberArk Software go up and down completely randomly.

Pair Corralation between Beta Systems and CyberArk Software

Assuming the 90 days horizon Beta Systems Software is expected to generate 0.54 times more return on investment than CyberArk Software. However, Beta Systems Software is 1.85 times less risky than CyberArk Software. It trades about -0.02 of its potential returns per unit of risk. CyberArk Software is currently generating about -0.08 per unit of risk. If you would invest  2,480  in Beta Systems Software on November 30, 2024 and sell it today you would lose (20.00) from holding Beta Systems Software or give up 0.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Beta Systems Software  vs.  CyberArk Software

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030
JavaScript chart by amCharts 3.21.15BSS CYB
       Timeline  
Beta Systems Software 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Beta Systems Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beta Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2222.52323.52424.52525.5
CyberArk Software 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 6 (%) 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 March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb300320340360380400

Beta Systems and CyberArk Software Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.17-5.37-3.57-1.770.031.83.65.47.2 0.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15BSS CYB
       Returns  

Pair Trading with Beta Systems and CyberArk Software

The main advantage of trading using opposite Beta Systems and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beta Systems 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
The idea behind Beta Systems Software 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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