Correlation Between Check Point and METISA Metalrgica

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

Diversification Opportunities for Check Point and METISA Metalrgica

0.45

Correlation Coefficient

Check Point  METISA Metalrgica

Very weak diversification

The 3 months correlation between Check and METISA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and METISA Metalrgica Timboense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METISA Metalrgica 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 METISA Metalrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METISA Metalrgica has no effect on the direction of Check Point i.e., Check Point and METISA Metalrgica go up and down completely randomly.

Pair Corralation between Check Point and METISA Metalrgica

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the METISA Metalrgica. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 4.01 times less risky than METISA Metalrgica. The stock trades about -0.35 of its potential returns per unit of risk. The METISA Metalrgica Timboense is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,688  in METISA Metalrgica Timboense on October 23, 2024 and sell it today you would lose (3.00) from holding METISA Metalrgica Timboense or give up 0.08% of portfolio value over 90 days.

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

Check Point Software  vs.  METISA Metalrgica Timboense

Check Point Software

Risk-Adjusted Performance

14 of 100

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

METISA Metalrgica

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Check Point and METISA Metalrgica

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

The idea behind Check Point Software and METISA Metalrgica Timboense 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.