Correlation Between Check Point and Fair Oaks

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

Diversification Opportunities for Check Point and Fair Oaks

-0.12

Correlation Coefficient

Check Point  Fair Oaks

Good diversification

The 3 months correlation between Check and Fair is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income 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 Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Check Point i.e., Check Point and Fair Oaks go up and down completely randomly.

Pair Corralation between Check Point and Fair Oaks

Assuming the 90 days trading horizon Check Point Software is expected to generate 2.24 times more return on investment than Fair Oaks. However, Check Point is 2.24 times more volatile than Fair Oaks Income. It trades about 0.11 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.16 per unit of risk. If you would invest  17,303  in Check Point Software on October 7, 2024 and sell it today you would earn a total of  972.00  from holding Check Point Software or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Check Point Software  vs.  Fair Oaks Income

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.

Fair Oaks Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Check Point and Fair Oaks

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

The idea behind Check Point Software and Fair Oaks Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.