Correlation Between Check Point and Monks Investment

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

Diversification Opportunities for Check Point and Monks Investment

-0.29

Correlation Coefficient

Check Point  Monks Investment

Very good diversification

The 3 months correlation between Check and Monks is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Check Point i.e., Check Point and Monks Investment go up and down completely randomly.

Pair Corralation between Check Point and Monks Investment

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.29 times more return on investment than Monks Investment. However, Check Point is 1.29 times more volatile than Monks Investment Trust. It trades about 0.21 of its potential returns per unit of risk. Monks Investment Trust is currently generating about -0.06 per unit of risk. If you would invest  18,579  in Check Point Software on December 30, 2024 and sell it today you would earn a total of  4,251  from holding Check Point Software or generate 22.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Check Point Software  vs.  Monks Investment Trust

Check Point Software

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Check Point and Monks Investment

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

The idea behind Check Point Software and Monks Investment 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.