Correlation Between Check Point and INTER CARS

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

Diversification Opportunities for Check Point and INTER CARS

0.65

Correlation Coefficient

Check Point  INTER CARS

Poor diversification

The 3 months correlation between Check and INTER is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Check Point i.e., Check Point and INTER CARS go up and down completely randomly.

Pair Corralation between Check Point and INTER CARS

Assuming the 90 days trading horizon Check Point is expected to generate 1.94 times less return on investment than INTER CARS. But when comparing it to its historical volatility, Check Point Software is 1.67 times less risky than INTER CARS. It trades about 0.18 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  11,060  in INTER CARS SA on September 23, 2024 and sell it today you would earn a total of  980.00  from holding INTER CARS SA or generate 8.86% 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.  INTER CARS SA

Check Point Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

INTER CARS SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS 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 INTER CARS

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

The idea behind Check Point Software and INTER CARS SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.