Correlation Between Allot Communications and CyberArk Software

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

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

Diversification Opportunities for Allot Communications and CyberArk Software

0.74

Correlation Coefficient

Allot Communications  CyberArk Software

Poor diversification

The 3 months correlation between Allot and CyberArk is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Allot Communications and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Allot Communications 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 Allot Communications are associated (or correlated) with CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of Allot Communications i.e., Allot Communications and CyberArk Software go up and down completely randomly.

Pair Corralation between Allot Communications and CyberArk Software

Given the investment horizon of 90 days Allot Communications is expected to generate 2.47 times more return on investment than CyberArk Software. However, Allot Communications is 2.47 times more volatile than CyberArk Software. It trades about -0.06 of its potential returns per unit of risk. CyberArk Software is currently generating about -0.36 per unit of risk. If you would invest  219.00  in Allot Communications on January 19, 2024 and sell it today you would lose (11.00) from holding Allot Communications or give up 5.02% of portfolio value over 90 days.

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

Allot Communications  vs.  CyberArk Software

Allot Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allot Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Allot Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

CyberArk Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, CyberArk Software is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Allot Communications and CyberArk Software

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

The idea behind Allot Communications and CyberArk Software 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.