Correlation Between Check Point and DXC Technology

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

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

Diversification Opportunities for Check Point and DXC Technology

-0.24

Correlation Coefficient

Check Point  DXC Technology

Very good diversification

The 3 months correlation between Check and DXC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Check Point 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 Check Point Software are associated (or correlated) with DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Check Point i.e., Check Point and DXC Technology go up and down completely randomly.

Pair Corralation between Check Point and DXC Technology

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.78 times more return on investment than DXC Technology. However, Check Point Software is 1.27 times less risky than DXC Technology. It trades about 0.21 of its potential returns per unit of risk. DXC Technology Co is currently generating about -0.13 per unit of risk. If you would invest  18,216  in Check Point Software on November 28, 2024 and sell it today you would earn a total of  3,603  from holding Check Point Software or generate 19.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Check Point Software  vs.  DXC Technology Co

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 16 (%) 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.

DXC Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Check Point and DXC Technology

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

The idea behind Check Point Software and DXC Technology Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.