Correlation Between Endesa SA and CyberArk Software

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

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

Diversification Opportunities for Endesa SA and CyberArk Software

0.77

Correlation Coefficient

Endesa SA  CyberArk Software

Poor diversification

The 3 months correlation between Endesa and CyberArk is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Endesa SA 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 Endesa SA 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 Endesa SA i.e., Endesa SA and CyberArk Software go up and down completely randomly.

Pair Corralation between Endesa SA and CyberArk Software

Assuming the 90 days trading horizon Endesa SA is expected to generate 4.57 times less return on investment than CyberArk Software. But when comparing it to its historical volatility, Endesa SA is 2.39 times less risky than CyberArk Software. It trades about 0.06 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  25,480  in CyberArk Software on September 22, 2024 and sell it today you would earn a total of  4,500  from holding CyberArk Software or generate 17.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Endesa SA  vs.  CyberArk Software

Endesa SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Endesa SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CyberArk Software

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 8 (%) 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.

Pair Trading with Endesa SA and CyberArk Software

The main advantage of trading using opposite Endesa SA and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA 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 Endesa SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.