Correlation Between Check Point and National Storage

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

Diversification Opportunities for Check Point and National Storage

-0.2

Correlation Coefficient

Check Point  National Storage

Good diversification

The 3 months correlation between Check and National is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of Check Point i.e., Check Point and National Storage go up and down completely randomly.

Pair Corralation between Check Point and National Storage

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.07 times more return on investment than National Storage. However, Check Point is 1.07 times more volatile than National Storage Affiliates. It trades about 0.17 of its potential returns per unit of risk. National Storage Affiliates is currently generating about -0.02 per unit of risk. If you would invest  18,070  in Check Point Software on December 26, 2024 and sell it today you would earn a total of  3,180  from holding Check Point Software or generate 17.6% 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.  National Storage Affiliates

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 fragile basic indicators, Check Point displayed solid returns over the last few months and may actually be approaching a breakup point.

National Storage Aff

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Storage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Check Point and National Storage

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

The idea behind Check Point Software and National Storage Affiliates 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.