Correlation Between Check Point and Danone SA

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

Diversification Opportunities for Check Point and Danone SA

0.04

Correlation Coefficient

Check Point  Danone SA

Significant diversification

The 3 months correlation between Check and Danone is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Check Point i.e., Check Point and Danone SA go up and down completely randomly.

Pair Corralation between Check Point and Danone SA

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the Danone SA. In addition to that, Check Point is 2.81 times more volatile than Danone SA. It trades about -0.02 of its total potential returns per unit of risk. Danone SA is currently generating about -0.01 per unit of volatility. If you would invest  6,576  in Danone SA on October 24, 2024 and sell it today you would lose (34.00) from holding Danone SA or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Check Point Software  vs.  Danone SA

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.

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Danone SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Check Point and Danone SA

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

The idea behind Check Point Software and Danone 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.