Correlation Between Check Point and Waste Management

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

Diversification Opportunities for Check Point and Waste Management

0.74

Correlation Coefficient

Check Point  Waste Management

Poor diversification

The 3 months correlation between Check and Waste is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Check Point i.e., Check Point and Waste Management go up and down completely randomly.

Pair Corralation between Check Point and Waste Management

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.89 times more return on investment than Waste Management. However, Check Point Software is 1.12 times less risky than Waste Management. It trades about 0.18 of its potential returns per unit of risk. Waste Management is currently generating about 0.04 per unit of risk. If you would invest  58,754  in Check Point Software on December 22, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  Waste Management

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.

Waste Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Waste Management is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Check Point and Waste Management

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

The idea behind Check Point Software and Waste Management 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.