Correlation Between Check Point and Lennar

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

Diversification Opportunities for Check Point and Lennar

-0.83

Correlation Coefficient

Check Point  Lennar

Pay attention - limited upside

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

Pair Corralation between Check Point and Lennar

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.26 times more return on investment than Lennar. However, Check Point Software is 3.83 times less risky than Lennar. It trades about 0.18 of its potential returns per unit of risk. Lennar is currently generating about -0.11 per unit of risk. If you would invest  58,754  in Check Point Software on December 24, 2024 and sell it today you would earn a total of  6,311  from holding Check Point Software or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	89.83%
Values	Daily Returns

Check Point Software  vs.  Lennar

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.

Lennar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennar 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Check Point and Lennar

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

The idea behind Check Point Software and Lennar 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.