Correlation Between Charter Communications and Check Point

Can any of the company-specific risk be diversified away by investing in both Charter Communications and Check Point 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 Charter Communications and Check Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Charter Communications and Check Point Software, you can compare the effects of market volatilities on Charter Communications and Check Point 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 Charter Communications with a short position of Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Check Point.

Diversification Opportunities for Charter Communications and Check Point

0.61

Correlation Coefficient

Charter Communications  Check Point

Poor diversification

The 3 months correlation between Charter and Check is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software and Charter Communications 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 Charter Communications are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Charter Communications i.e., Charter Communications and Check Point go up and down completely randomly.

Pair Corralation between Charter Communications and Check Point

Assuming the 90 days trading horizon Charter Communications is expected to under-perform the Check Point. But the stock apears to be less risky and, when comparing its historical volatility, Charter Communications is 1.17 times less risky than Check Point. The stock trades about -0.01 of its potential returns per unit of risk. The Check Point Software is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  45,135  in Check Point Software on October 8, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Charter Communications  vs.  Check Point Software

Charter Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Charter Communications and Check Point

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

The idea behind Charter Communications and Check Point Software 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.