Correlation Between Check Point and CyberArk Software

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

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

Diversification Opportunities for Check Point and CyberArk Software

-0.1

Correlation Coefficient

Check Point  CyberArk Software

Good diversification

The 3 months correlation between Check and CyberArk is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Check Point 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 Check Point 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 Check Point i.e., Check Point and CyberArk Software go up and down completely randomly.

Pair Corralation between Check Point and CyberArk Software

Given the investment horizon of 90 days Check Point is expected to generate 5.21 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Check Point Software is 1.82 times less risky than CyberArk Software. It trades about 0.08 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  28,573  in CyberArk Software on August 30, 2024 and sell it today you would earn a total of  3,305  from holding CyberArk Software or generate 11.57% return on investment over 90 days.

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

Check Point Software  vs.  CyberArk Software

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CyberArk Software

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental drivers, CyberArk Software may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Check Point and CyberArk Software

The main advantage of trading using opposite Check Point and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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 Check Point 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.