Correlation Between Check Point and Mosaic

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

Diversification Opportunities for Check Point and Mosaic

-0.26

Correlation Coefficient

Check Point  Mosaic

Very good diversification

The 3 months correlation between Check and Mosaic is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Check Point i.e., Check Point and Mosaic go up and down completely randomly.

Pair Corralation between Check Point and Mosaic

Assuming the 90 days trading horizon Check Point is expected to generate 1.4 times less return on investment than Mosaic. But when comparing it to its historical volatility, Check Point Software is 1.11 times less risky than Mosaic. It trades about 0.03 of its potential returns per unit of risk. The Mosaic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,427  in The Mosaic on September 4, 2024 and sell it today you would earn a total of  112.00  from holding The Mosaic or generate 4.61% 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.  The Mosaic

Check Point Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mosaic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mosaic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Check Point and Mosaic

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

The idea behind Check Point Software and The Mosaic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.