Correlation Between Check Point and TMT Investments

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

Diversification Opportunities for Check Point and TMT Investments

-0.87

Correlation Coefficient

Check Point  TMT Investments

Pay attention - limited upside

The 3 months correlation between Check and TMT is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and TMT Investments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Investments PLC 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 TMT Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Investments PLC has no effect on the direction of Check Point i.e., Check Point and TMT Investments go up and down completely randomly.

Pair Corralation between Check Point and TMT Investments

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.32 times more return on investment than TMT Investments. However, Check Point is 1.32 times more volatile than TMT Investments PLC. It trades about 0.21 of its potential returns per unit of risk. TMT Investments PLC is currently generating about -0.17 per unit of risk. If you would invest  18,579  in Check Point Software on December 29, 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	Significant
Accuracy	95.31%
Values	Daily Returns

Check Point Software  vs.  TMT Investments PLC

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.

TMT Investments PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TMT Investments PLC 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Check Point and TMT Investments

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

The idea behind Check Point Software and TMT Investments PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.