Correlation Between Check Point and PROSUS NV

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

Diversification Opportunities for Check Point and PROSUS NV

0.15

Correlation Coefficient

Check Point  PROSUS NV

Average diversification

The 3 months correlation between Check and PROSUS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and PROSUS NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSUS NV ADR 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 PROSUS NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROSUS NV ADR has no effect on the direction of Check Point i.e., Check Point and PROSUS NV go up and down completely randomly.

Pair Corralation between Check Point and PROSUS NV

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.32 times more return on investment than PROSUS NV. However, Check Point is 1.32 times more volatile than PROSUS NV ADR. It trades about -0.04 of its potential returns per unit of risk. PROSUS NV ADR is currently generating about -0.1 per unit of risk. If you would invest  18,790  in Check Point Software on October 10, 2024 and sell it today you would lose (1,255) from holding Check Point Software or give up 6.68% of portfolio value over 90 days.

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

Check Point Software  vs.  PROSUS NV ADR

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. 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.

PROSUS NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROSUS NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Check Point and PROSUS NV

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

The idea behind Check Point Software and PROSUS NV ADR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.