Correlation Between Check Point and G2D Investments

Can any of the company-specific risk be diversified away by investing in both Check Point and G2D Investments 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 G2D Investments 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 G2D Investments, you can compare the effects of market volatilities on Check Point and G2D Investments 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 G2D Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and G2D Investments.

Diversification Opportunities for Check Point and G2D Investments

-0.85

Correlation Coefficient

Check Point  G2D Investments

Pay attention - limited upside

The 3 months correlation between Check and G2D is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and G2D Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G2D Investments 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 G2D Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G2D Investments has no effect on the direction of Check Point i.e., Check Point and G2D Investments go up and down completely randomly.

Pair Corralation between Check Point and G2D Investments

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.25 times more return on investment than G2D Investments. However, Check Point is 1.25 times more volatile than G2D Investments. It trades about 0.26 of its potential returns per unit of risk. G2D Investments is currently generating about -0.22 per unit of risk. If you would invest  45,135  in Check Point Software on October 6, 2024 and sell it today you would earn a total of  13,619  from holding Check Point Software or generate 30.17% return on investment over 90 days.

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

Check Point Software  vs.  G2D Investments

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.

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Check Point and G2D Investments

The main advantage of trading using opposite Check Point and G2D Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, G2D Investments 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 G2D Investments will offset losses from the drop in G2D Investments' long position.

The idea behind Check Point Software and G2D Investments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.