Correlation Between Check Point and Vulcan Materials

Can any of the company-specific risk be diversified away by investing in both Check Point and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials Co, you can compare the effects of market volatilities on Check Point and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Vulcan Materials.

Diversification Opportunities for Check Point and Vulcan Materials

-0.53

Correlation Coefficient

Check Point  Vulcan Materials

Excellent diversification

The 3 months correlation between Check and Vulcan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Check Point i.e., Check Point and Vulcan Materials go up and down completely randomly.

Pair Corralation between Check Point and Vulcan Materials

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.89 times more return on investment than Vulcan Materials. However, Check Point Software is 1.13 times less risky than Vulcan Materials. It trades about 0.21 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about -0.08 per unit of risk. If you would invest  18,641  in Check Point Software on December 31, 2024 and sell it today you would earn a total of  4,189  from holding Check Point Software or generate 22.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Check Point Software  vs.  Vulcan Materials 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 unsteady basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Check Point and Vulcan Materials

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

The idea behind Check Point Software and Vulcan Materials 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.