Correlation Between Crowdstrike Holdings and VMware

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

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

Diversification Opportunities for Crowdstrike Holdings and VMware

-0.11

Correlation Coefficient

Crowdstrike Holdings  VMware

Good diversification

The 3 months correlation between Crowdstrike and VMware is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Crowdstrike Holdings and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Crowdstrike Holdings 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 Crowdstrike Holdings are associated (or correlated) with VMware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMware Inc has no effect on the direction of Crowdstrike Holdings i.e., Crowdstrike Holdings and VMware go up and down completely randomly.

Pair Corralation between Crowdstrike Holdings and VMware

Given the investment horizon of 90 days Crowdstrike Holdings is expected to generate 1.4 times more return on investment than VMware. However, Crowdstrike Holdings is 1.4 times more volatile than VMware Inc. It trades about 0.14 of its potential returns per unit of risk. VMware Inc is currently generating about 0.05 per unit of risk. If you would invest  13,040  in Crowdstrike Holdings on January 19, 2024 and sell it today you would earn a total of  16,522  from holding Crowdstrike Holdings or generate 126.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.84%
Values	Daily Returns

Crowdstrike Holdings  vs.  VMware Inc

Crowdstrike Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Crowdstrike Holdings and VMware

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

The idea behind Crowdstrike Holdings and VMware Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.