Correlation Between Check Point and Metalfrio Solutions

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

Diversification Opportunities for Check Point and Metalfrio Solutions

0.69

Correlation Coefficient

Check Point  Metalfrio Solutions

Poor diversification

The 3 months correlation between Check and Metalfrio is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Metalfrio Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalfrio Solutions 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 Metalfrio Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalfrio Solutions has no effect on the direction of Check Point i.e., Check Point and Metalfrio Solutions go up and down completely randomly.

Pair Corralation between Check Point and Metalfrio Solutions

Assuming the 90 days trading horizon Check Point is expected to generate 47.81 times less return on investment than Metalfrio Solutions. But when comparing it to its historical volatility, Check Point Software is 11.45 times less risky than Metalfrio Solutions. It trades about 0.1 of its potential returns per unit of risk. Metalfrio Solutions SA is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  15,499  in Metalfrio Solutions SA on October 10, 2024 and sell it today you would earn a total of  14,522  from holding Metalfrio Solutions SA or generate 93.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Check Point Software  vs.  Metalfrio Solutions SA

Check Point Software

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 15 (%) 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.

Metalfrio Solutions

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metalfrio Solutions SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Metalfrio Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Metalfrio Solutions

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

The idea behind Check Point Software and Metalfrio Solutions 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.