Correlation Between Check Point and Arqit Quantum

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

Diversification Opportunities for Check Point and Arqit Quantum

-0.32

Correlation Coefficient

Check Point  Arqit Quantum

Very good diversification

The 3 months correlation between Check and Arqit is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Arqit Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arqit Quantum 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 Arqit Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arqit Quantum has no effect on the direction of Check Point i.e., Check Point and Arqit Quantum go up and down completely randomly.

Pair Corralation between Check Point and Arqit Quantum

Given the investment horizon of 90 days Check Point Software is expected to under-perform the Arqit Quantum. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 5.99 times less risky than Arqit Quantum. The stock trades about -0.02 of its potential returns per unit of risk. The Arqit Quantum is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  760.00  in Arqit Quantum on September 3, 2024 and sell it today you would earn a total of  1,238  from holding Arqit Quantum or generate 162.89% return on investment over 90 days.

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

Check Point Software  vs.  Arqit Quantum

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.

Arqit Quantum

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arqit Quantum are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arqit Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Arqit Quantum

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

The idea behind Check Point Software and Arqit Quantum 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.