Correlation Between Check Point and Dell Technologies

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

Diversification Opportunities for Check Point and Dell Technologies

-0.44

Correlation Coefficient

Check Point  Dell Technologies

Very good diversification

The 3 months correlation between Check and Dell is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Check Point i.e., Check Point and Dell Technologies go up and down completely randomly.

Pair Corralation between Check Point and Dell Technologies

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.61 times more return on investment than Dell Technologies. However, Check Point Software is 1.64 times less risky than Dell Technologies. It trades about 0.0 of its potential returns per unit of risk. Dell Technologies is currently generating about -0.04 per unit of risk. If you would invest  17,805  in Check Point Software on October 8, 2024 and sell it today you would lose (15.00) from holding Check Point Software or give up 0.08% of portfolio value over 90 days.

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

Check Point Software  vs.  Dell Technologies

Check Point Software

Risk-Adjusted Performance

0 of 100

Weak

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

Dell Technologies

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Dell Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Check Point and Dell Technologies

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

The idea behind Check Point Software and Dell 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.