Correlation Between Raytheon Technologies and Check Point

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

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

Diversification Opportunities for Raytheon Technologies and Check Point

0.75

Correlation Coefficient

Raytheon Technologies  Check Point

Poor diversification

The 3 months correlation between Raytheon and Check is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Check Point go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Check Point

Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 3.99 times less return on investment than Check Point. But when comparing it to its historical volatility, Raytheon Technologies Corp is 1.23 times less risky than Check Point. It trades about 0.07 of its potential returns per unit of risk. Check Point Software is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  18,216  in Check Point Software on November 29, 2024 and sell it today you would earn a total of  3,971  from holding Check Point Software or generate 21.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Raytheon Technologies Corp  vs.  Check Point Software

Raytheon Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Check Point Software

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raytheon Technologies and Check Point

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

The idea behind Raytheon Technologies Corp and Check Point 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.