Correlation Between Check Point and Life Science

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

Diversification Opportunities for Check Point and Life Science

0.05

Correlation Coefficient

Check Point  Life Science

Significant diversification

The 3 months correlation between Check and Life is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Life Science REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Science REIT 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 Life Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Science REIT has no effect on the direction of Check Point i.e., Check Point and Life Science go up and down completely randomly.

Pair Corralation between Check Point and Life Science

Assuming the 90 days trading horizon Check Point is expected to generate 1.03 times less return on investment than Life Science. But when comparing it to its historical volatility, Check Point Software is 1.66 times less risky than Life Science. It trades about 0.19 of its potential returns per unit of risk. Life Science REIT is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,880  in Life Science REIT on December 21, 2024 and sell it today you would earn a total of  780.00  from holding Life Science REIT or generate 20.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Check Point Software  vs.  Life Science REIT

Check Point Software

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Life Science REIT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Life Science REIT are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Life Science unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Life Science

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

The idea behind Check Point Software and Life Science REIT 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.