Correlation Between Secureworks Corp and SolarWinds Corp

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

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

Diversification Opportunities for Secureworks Corp and SolarWinds Corp

0.46

Correlation Coefficient

Secureworks Corp  SolarWinds Corp

Very weak diversification

The 3 months correlation between Secureworks and SolarWinds is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Secureworks Corp and SolarWinds Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarWinds Corp and Secureworks Corp 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 Secureworks Corp are associated (or correlated) with SolarWinds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarWinds Corp has no effect on the direction of Secureworks Corp i.e., Secureworks Corp and SolarWinds Corp go up and down completely randomly.

Pair Corralation between Secureworks Corp and SolarWinds Corp

Given the investment horizon of 90 days Secureworks Corp is expected to under-perform the SolarWinds Corp. But the stock apears to be less risky and, when comparing its historical volatility, Secureworks Corp is 1.14 times less risky than SolarWinds Corp. The stock trades about -0.04 of its potential returns per unit of risk. The SolarWinds Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,305  in SolarWinds Corp on September 28, 2024 and sell it today you would earn a total of  139.00  from holding SolarWinds Corp or generate 10.65% return on investment over 90 days.

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

Secureworks Corp  vs.  SolarWinds Corp

Secureworks Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

SolarWinds Corp

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Secureworks Corp and SolarWinds Corp

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

The idea behind Secureworks Corp and SolarWinds Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.