Correlation Between Check Point and Wheaton Precious

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

Diversification Opportunities for Check Point and Wheaton Precious

0.86

Correlation Coefficient

Check Point  Wheaton Precious

Very poor diversification

The 3 months correlation between Check and Wheaton is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Check Point i.e., Check Point and Wheaton Precious go up and down completely randomly.

Pair Corralation between Check Point and Wheaton Precious

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.91 times more return on investment than Wheaton Precious. However, Check Point Software is 1.1 times less risky than Wheaton Precious. It trades about 0.25 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.12 per unit of risk. If you would invest  18,641  in Check Point Software on December 3, 2024 and sell it today you would earn a total of  3,144  from holding Check Point Software or generate 16.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.02%
Values	Daily Returns

Check Point Software  vs.  Wheaton Precious Metals

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 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wheaton Precious Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and Wheaton Precious

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

The idea behind Check Point Software and Wheaton Precious Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.