Correlation Between Check Point and ArcelorMittal

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

Diversification Opportunities for Check Point and ArcelorMittal

0.83

Correlation Coefficient

Check Point  ArcelorMittal

Very poor diversification

The 3 months correlation between Check and ArcelorMittal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of Check Point i.e., Check Point and ArcelorMittal go up and down completely randomly.

Pair Corralation between Check Point and ArcelorMittal

Assuming the 90 days trading horizon Check Point is expected to generate 2.51 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Check Point Software is 3.8 times less risky than ArcelorMittal. It trades about 0.18 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,184  in ArcelorMittal SA on December 26, 2024 and sell it today you would earn a total of  1,813  from holding ArcelorMittal SA or generate 25.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  ArcelorMittal SA

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. Despite somewhat weak technical indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ArcelorMittal SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ArcelorMittal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and ArcelorMittal

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

The idea behind Check Point Software and ArcelorMittal SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .