Correlation Between Check Point and CSG Systems

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

Diversification Opportunities for Check Point and CSG Systems

0.91

Correlation Coefficient

Check Point  CSG Systems

Almost no diversification

The 3 months correlation between Check and CSG is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and CSG Systems International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSG Systems International 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 CSG Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSG Systems International has no effect on the direction of Check Point i.e., Check Point and CSG Systems go up and down completely randomly.

Pair Corralation between Check Point and CSG Systems

Given the investment horizon of 90 days Check Point Software is expected to generate 1.07 times more return on investment than CSG Systems. However, Check Point is 1.07 times more volatile than CSG Systems International. It trades about 0.2 of its potential returns per unit of risk. CSG Systems International is currently generating about 0.21 per unit of risk. If you would invest  18,790  in Check Point Software on December 27, 2024 and sell it today you would earn a total of  3,997  from holding Check Point Software or generate 21.27% return on investment over 90 days.

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

Check Point Software  vs.  CSG Systems International

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 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Check Point reported solid returns over the last few months and may actually be approaching a breakup point.

CSG Systems International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSG Systems International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, CSG Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and CSG Systems

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

The idea behind Check Point Software and CSG Systems International 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.