Correlation Between Check Point and GX AI

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

Diversification Opportunities for Check Point and GX AI

0.86

Correlation Coefficient

Check Point  GX AI

Very poor diversification

The 3 months correlation between Check and BAIQ39 is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and GX AI TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GX AI TECH 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 GX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GX AI TECH has no effect on the direction of Check Point i.e., Check Point and GX AI go up and down completely randomly.

Pair Corralation between Check Point and GX AI

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.9 times more return on investment than GX AI. However, Check Point Software is 1.11 times less risky than GX AI. It trades about 0.13 of its potential returns per unit of risk. GX AI TECH is currently generating about 0.11 per unit of risk. If you would invest  33,766  in Check Point Software on October 8, 2024 and sell it today you would earn a total of  24,988  from holding Check Point Software or generate 74.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.9%
Values	Daily Returns

Check Point Software  vs.  GX AI TECH

Check Point Software

Risk-Adjusted Performance

16 of 100

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. Despite somewhat weak technical indicators, Check Point sustained solid returns over the last few months and may actually be approaching a breakup point.

GX AI TECH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GX AI TECH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GX AI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and GX AI

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

The idea behind Check Point Software and GX AI TECH 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.