Correlation Between Check Point and American Water

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

Diversification Opportunities for Check Point and American Water

0.0

Correlation Coefficient

Check Point  American Water

Pay attention - limited upside

The 3 months correlation between Check and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and American Water Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Water Works 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 American Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Water Works has no effect on the direction of Check Point i.e., Check Point and American Water go up and down completely randomly.

Pair Corralation between Check Point and American Water

If you would invest  18,030  in Check Point Software on December 21, 2024 and sell it today you would earn a total of  3,070  from holding Check Point Software or generate 17.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Check Point Software  vs.  American Water Works

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.

American Water Works

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Water Works are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, American Water may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Check Point and American Water

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

The idea behind Check Point Software and American Water Works 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.