Correlation Between Check Point and Sumitomo Rubber

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

Diversification Opportunities for Check Point and Sumitomo Rubber

0.68

Correlation Coefficient

Check Point  Sumitomo Rubber

Poor diversification

The 3 months correlation between Check and Sumitomo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu 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 Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Check Point i.e., Check Point and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Check Point and Sumitomo Rubber

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.06 times more return on investment than Sumitomo Rubber. However, Check Point is 1.06 times more volatile than Sumitomo Rubber Industries. It trades about 0.17 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.13 per unit of risk. If you would invest  17,885  in Check Point Software on December 29, 2024 and sell it today you would earn a total of  3,265  from holding Check Point Software or generate 18.26% return on investment over 90 days.

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

Check Point Software  vs.  Sumitomo Rubber Industries

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 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Check Point displayed solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Rubber Indu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Check Point and Sumitomo Rubber

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

The idea behind Check Point Software and Sumitomo Rubber Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.