Correlation Between Cloudflare and Tenable Holdings

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

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

Diversification Opportunities for Cloudflare and Tenable Holdings

0.45

Correlation Coefficient

Cloudflare  Tenable Holdings

Very weak diversification

The 3 months correlation between Cloudflare and Tenable is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Tenable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenable Holdings and Cloudflare 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 Cloudflare are associated (or correlated) with Tenable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenable Holdings has no effect on the direction of Cloudflare i.e., Cloudflare and Tenable Holdings go up and down completely randomly.

Pair Corralation between Cloudflare and Tenable Holdings

Considering the 90-day investment horizon Cloudflare is expected to generate 1.51 times more return on investment than Tenable Holdings. However, Cloudflare is 1.51 times more volatile than Tenable Holdings. It trades about 0.18 of its potential returns per unit of risk. Tenable Holdings is currently generating about -0.01 per unit of risk. If you would invest  8,089  in Cloudflare on September 30, 2024 and sell it today you would earn a total of  2,972  from holding Cloudflare or generate 36.74% return on investment over 90 days.

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

Cloudflare  vs.  Tenable Holdings

Cloudflare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tenable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tenable Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cloudflare and Tenable Holdings

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

The idea behind Cloudflare and Tenable 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .