Correlation Between Check Point and Allianz Technology

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

Diversification Opportunities for Check Point and Allianz Technology

-0.32

Correlation Coefficient

Check Point  Allianz Technology

Very good diversification

The 3 months correlation between Check and Allianz is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Allianz Technology Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz Technology Trust 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 Allianz Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz Technology Trust has no effect on the direction of Check Point i.e., Check Point and Allianz Technology go up and down completely randomly.

Pair Corralation between Check Point and Allianz Technology

Assuming the 90 days trading horizon Check Point is expected to generate 1.71 times less return on investment than Allianz Technology. But when comparing it to its historical volatility, Check Point Software is 1.18 times less risky than Allianz Technology. It trades about 0.18 of its potential returns per unit of risk. Allianz Technology Trust is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  36,400  in Allianz Technology Trust on September 1, 2024 and sell it today you would earn a total of  3,350  from holding Allianz Technology Trust or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Check Point Software  vs.  Allianz Technology Trust

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Allianz Technology Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Allianz Technology

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

The idea behind Check Point Software and Allianz Technology Trust 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.