Correlation Between Check Point and ARISTOCRAT LEISURE

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

Diversification Opportunities for Check Point and ARISTOCRAT LEISURE

-0.22

Correlation Coefficient

Check Point  ARISTOCRAT LEISURE

Very good diversification

The 3 months correlation between Check and ARISTOCRAT is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Check Point i.e., Check Point and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Check Point and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the ARISTOCRAT LEISURE. In addition to that, Check Point is 1.48 times more volatile than ARISTOCRAT LEISURE. It trades about -0.08 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.25 per unit of volatility. If you would invest  4,140  in ARISTOCRAT LEISURE on October 14, 2024 and sell it today you would earn a total of  160.00  from holding ARISTOCRAT LEISURE or generate 3.86% 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.  ARISTOCRAT LEISURE

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

ARISTOCRAT LEISURE

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and ARISTOCRAT LEISURE

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

The idea behind Check Point Software and ARISTOCRAT LEISURE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.