Correlation Between Palo Alto and Akamai Technologies

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

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

Diversification Opportunities for Palo Alto and Akamai Technologies

-0.48

Correlation Coefficient

Palo Alto  Akamai Technologies

Very good diversification

The 3 months correlation between Palo and Akamai is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies and Palo Alto 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 Palo Alto Networks are associated (or correlated) with Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Palo Alto i.e., Palo Alto and Akamai Technologies go up and down completely randomly.

Pair Corralation between Palo Alto and Akamai Technologies

Given the investment horizon of 90 days Palo Alto Networks is expected to under-perform the Akamai Technologies. In addition to that, Palo Alto is 1.54 times more volatile than Akamai Technologies. It trades about -0.08 of its total potential returns per unit of risk. Akamai Technologies is currently generating about 0.16 per unit of volatility. If you would invest  9,310  in Akamai Technologies on September 27, 2024 and sell it today you would earn a total of  450.00  from holding Akamai Technologies or generate 4.83% return on investment over 90 days.

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

Palo Alto Networks  vs.  Akamai Technologies

Palo Alto Networks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akamai Technologies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Palo Alto and Akamai Technologies

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

The idea behind Palo Alto Networks and Akamai Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.