Correlation Between VeriSign and Tenable Holdings

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

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

Diversification Opportunities for VeriSign and Tenable Holdings

0.47

Correlation Coefficient

VeriSign  Tenable Holdings

Very weak diversification

The 3 months correlation between VeriSign and Tenable is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Tenable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenable Holdings and VeriSign 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 VeriSign 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 VeriSign i.e., VeriSign and Tenable Holdings go up and down completely randomly.

Pair Corralation between VeriSign and Tenable Holdings

Given the investment horizon of 90 days VeriSign is expected to generate 3.25 times less return on investment than Tenable Holdings. But when comparing it to its historical volatility, VeriSign is 1.35 times less risky than Tenable Holdings. It trades about 0.02 of its potential returns per unit of risk. Tenable Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,007  in Tenable Holdings on September 1, 2024 and sell it today you would earn a total of  191.00  from holding Tenable Holdings or generate 4.77% return on investment over 90 days.

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

VeriSign  vs.  Tenable Holdings

VeriSign

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VeriSign is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Tenable Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenable Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tenable Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VeriSign and Tenable Holdings

The main advantage of trading using opposite VeriSign and Tenable Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VeriSign 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 VeriSign 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.