Correlation Between Rapid7 and Crowdstrike Holdings

Can any of the company-specific risk be diversified away by investing in both Rapid7 and Crowdstrike 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 Rapid7 and Crowdstrike Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rapid7 Inc and Crowdstrike Holdings, you can compare the effects of market volatilities on Rapid7 and Crowdstrike 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 Rapid7 with a short position of Crowdstrike Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rapid7 and Crowdstrike Holdings.

Diversification Opportunities for Rapid7 and Crowdstrike Holdings

0.58

Correlation Coefficient

Rapid7  Crowdstrike Holdings

Very weak diversification

The 3 months correlation between Rapid7 and Crowdstrike is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rapid7 Inc and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings and Rapid7 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 Rapid7 Inc are associated (or correlated) with Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of Rapid7 i.e., Rapid7 and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between Rapid7 and Crowdstrike Holdings

Considering the 90-day investment horizon Rapid7 is expected to generate 13.21 times less return on investment than Crowdstrike Holdings. But when comparing it to its historical volatility, Rapid7 Inc is 1.29 times less risky than Crowdstrike Holdings. It trades about 0.02 of its potential returns per unit of risk. Crowdstrike Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  28,047  in Crowdstrike Holdings on September 30, 2024 and sell it today you would earn a total of  7,452  from holding Crowdstrike Holdings or generate 26.57% return on investment over 90 days.

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

Rapid7 Inc  vs.  Crowdstrike Holdings

Rapid7 Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid7 Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Rapid7 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Crowdstrike Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crowdstrike Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Crowdstrike Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rapid7 and Crowdstrike Holdings

The main advantage of trading using opposite Rapid7 and Crowdstrike Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rapid7 position performs unexpectedly, Crowdstrike 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 Crowdstrike Holdings will offset losses from the drop in Crowdstrike Holdings' long position.

The idea behind Rapid7 Inc and Crowdstrike 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.