Correlation Between Check Point and Sabre Insurance

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

Diversification Opportunities for Check Point and Sabre Insurance

0.42

Correlation Coefficient

Check Point  Sabre Insurance

Very weak diversification

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

Pair Corralation between Check Point and Sabre Insurance

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.77 times more return on investment than Sabre Insurance. However, Check Point Software is 1.29 times less risky than Sabre Insurance. It trades about 0.19 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.11 per unit of risk. If you would invest  17,774  in Check Point Software on September 12, 2024 and sell it today you would earn a total of  1,010  from holding Check Point Software or generate 5.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Check Point Software  vs.  Sabre Insurance Group

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

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance 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 Sabre Insurance

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

The idea behind Check Point Software and Sabre Insurance Group 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.