Correlation Between Check Point and Xaar Plc

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

Diversification Opportunities for Check Point and Xaar Plc

0.37

Correlation Coefficient

Check Point  Xaar Plc

Weak diversification

The 3 months correlation between Check and Xaar is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Xaar plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xaar 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 Xaar Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xaar plc has no effect on the direction of Check Point i.e., Check Point and Xaar Plc go up and down completely randomly.

Pair Corralation between Check Point and Xaar Plc

Assuming the 90 days trading horizon Check Point is expected to generate 11.88 times less return on investment than Xaar Plc. But when comparing it to its historical volatility, Check Point Software is 5.06 times less risky than Xaar Plc. It trades about 0.05 of its potential returns per unit of risk. Xaar plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,400  in Xaar plc on October 24, 2024 and sell it today you would earn a total of  1,000.00  from holding Xaar plc or generate 13.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Check Point Software  vs.  Xaar plc

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Xaar plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xaar plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Xaar Plc 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 Xaar Plc

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

The idea behind Check Point Software and Xaar 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.