Correlation Between Check Point and Graphic Packaging

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

Diversification Opportunities for Check Point and Graphic Packaging

0.12

Correlation Coefficient

Check Point  Graphic Packaging

Average diversification

The 3 months correlation between Check and Graphic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Check Point i.e., Check Point and Graphic Packaging go up and down completely randomly.

Pair Corralation between Check Point and Graphic Packaging

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.93 times more return on investment than Graphic Packaging. However, Check Point Software is 1.08 times less risky than Graphic Packaging. It trades about 0.07 of its potential returns per unit of risk. Graphic Packaging Holding is currently generating about 0.04 per unit of risk. If you would invest  11,626  in Check Point Software on October 23, 2024 and sell it today you would earn a total of  6,494  from holding Check Point Software or generate 55.86% return on investment over 90 days.

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

Check Point Software  vs.  Graphic Packaging Holding

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 newest stock price disarray, may contribute to short-term losses for the investors.

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Graphic Packaging 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 Graphic Packaging

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

The idea behind Check Point Software and Graphic Packaging Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .