Correlation Between Check Point and Akamai Technologies

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

Diversification Opportunities for Check Point and Akamai Technologies

0.63

Correlation Coefficient

Check Point  Akamai Technologies

Poor diversification

The 3 months correlation between Check and Akamai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies 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 Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Check Point i.e., Check Point and Akamai Technologies go up and down completely randomly.

Pair Corralation between Check Point and Akamai Technologies

Given the investment horizon of 90 days Check Point Software is expected to under-perform the Akamai Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 1.06 times less risky than Akamai Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Akamai Technologies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,013  in Akamai Technologies on September 4, 2024 and sell it today you would lose (220.00) from holding Akamai Technologies or give up 2.2% of portfolio value over 90 days.

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

Check Point Software  vs.  Akamai Technologies

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akamai Technologies is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Check Point and Akamai Technologies

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

The idea behind Check Point Software and Akamai Technologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.