Correlation Between Check Point and K3 Business

Can any of the company-specific risk be diversified away by investing in both Check Point and K3 Business 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 K3 Business 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 K3 Business Technology, you can compare the effects of market volatilities on Check Point and K3 Business 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 K3 Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and K3 Business.

Diversification Opportunities for Check Point and K3 Business

0.4

Correlation Coefficient

Check Point  K3 Business

Very weak diversification

The 3 months correlation between Check and KBT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and K3 Business Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K3 Business 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 K3 Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K3 Business Technology has no effect on the direction of Check Point i.e., Check Point and K3 Business go up and down completely randomly.

Pair Corralation between Check Point and K3 Business

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.86 times more return on investment than K3 Business. However, Check Point Software is 1.17 times less risky than K3 Business. It trades about 0.06 of its potential returns per unit of risk. K3 Business Technology is currently generating about -0.13 per unit of risk. If you would invest  17,891  in Check Point Software on August 30, 2024 and sell it today you would earn a total of  288.00  from holding Check Point Software or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  K3 Business Technology

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.

K3 Business Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K3 Business Technology 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Check Point and K3 Business

The main advantage of trading using opposite Check Point and K3 Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, K3 Business 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 K3 Business will offset losses from the drop in K3 Business' long position.

The idea behind Check Point Software and K3 Business Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.