Correlation Between Check Point and Caledonia Mining

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

Diversification Opportunities for Check Point and Caledonia Mining

0.42

Correlation Coefficient

Check Point  Caledonia Mining

Very weak diversification

The 3 months correlation between Check and Caledonia is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Check Point i.e., Check Point and Caledonia Mining go up and down completely randomly.

Pair Corralation between Check Point and Caledonia Mining

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.68 times more return on investment than Caledonia Mining. However, Check Point Software is 1.46 times less risky than Caledonia Mining. It trades about 0.2 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.21 per unit of risk. If you would invest  18,179  in Check Point Software on September 28, 2024 and sell it today you would earn a total of  854.00  from holding Check Point Software or generate 4.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Check Point Software  vs.  Caledonia Mining

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caledonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caledonia Mining 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 January 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 Caledonia Mining

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

The idea behind Check Point Software and Caledonia Mining 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..