Correlation Between CyberArk Software and Aspen Technology

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

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

Diversification Opportunities for CyberArk Software and Aspen Technology

-0.01

Correlation Coefficient

CyberArk Software  Aspen Technology

Good diversification

The 3 months correlation between CyberArk and Aspen is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CyberArk Software and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology and CyberArk Software 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 CyberArk Software are associated (or correlated) with Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of CyberArk Software i.e., CyberArk Software and Aspen Technology go up and down completely randomly.

Pair Corralation between CyberArk Software and Aspen Technology

Given the investment horizon of 90 days CyberArk Software is expected to under-perform the Aspen Technology. But the stock apears to be less risky and, when comparing its historical volatility, CyberArk Software is 1.37 times less risky than Aspen Technology. The stock trades about -0.34 of its potential returns per unit of risk. The Aspen Technology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  20,179  in Aspen Technology on January 24, 2024 and sell it today you would lose (471.00) from holding Aspen Technology or give up 2.33% of portfolio value over 90 days.

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

CyberArk Software  vs.  Aspen Technology

CyberArk Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 2 (%) 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.

Aspen Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aspen Technology is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CyberArk Software and Aspen Technology

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

The idea behind CyberArk Software and Aspen Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.