Correlation Between CyberArk Software and Consolidated Communications

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

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

Diversification Opportunities for CyberArk Software and Consolidated Communications

0.92

Correlation Coefficient

CyberArk Software  Consolidated Communications

Almost no diversification

The 3 months correlation between CyberArk and Consolidated is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications and CyberArk Software 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 CyberArk Software are associated (or correlated) with Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of CyberArk Software i.e., CyberArk Software and Consolidated Communications go up and down completely randomly.

Pair Corralation between CyberArk Software and Consolidated Communications

Assuming the 90 days trading horizon CyberArk Software is expected to generate 2.5 times more return on investment than Consolidated Communications. However, CyberArk Software is 2.5 times more volatile than Consolidated Communications Holdings. It trades about 0.09 of its potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.07 per unit of risk. If you would invest  19,540  in CyberArk Software on September 25, 2024 and sell it today you would earn a total of  11,040  from holding CyberArk Software or generate 56.5% return on investment over 90 days.

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

CyberArk Software  vs.  Consolidated Communications Ho

CyberArk Software

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 9 (%) 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.

Consolidated Communications

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CyberArk Software and Consolidated Communications

The main advantage of trading using opposite CyberArk Software and Consolidated Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CyberArk Software position performs unexpectedly, Consolidated Communications 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 Consolidated Communications will offset losses from the drop in Consolidated Communications' long position.

The idea behind CyberArk Software and Consolidated Communications Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.