Correlation Between Check Point and BII Railway

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

Diversification Opportunities for Check Point and BII Railway

0.73

Correlation Coefficient

Check Point  BII Railway

Poor diversification

The 3 months correlation between Check and BII is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Check Point i.e., Check Point and BII Railway go up and down completely randomly.

Pair Corralation between Check Point and BII Railway

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.03 times more return on investment than BII Railway. However, Check Point is 1.03 times more volatile than BII Railway Transportation. It trades about 0.17 of its potential returns per unit of risk. BII Railway Transportation is currently generating about 0.06 per unit of risk. If you would invest  17,885  in Check Point Software on December 28, 2024 and sell it today you would earn a total of  3,315  from holding Check Point Software or generate 18.54% 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.  BII Railway Transportation

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 unsteady basic indicators, Check Point displayed solid returns over the last few months and may actually be approaching a breakup point.

BII Railway Transpor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BII Railway 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 BII Railway

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

The idea behind Check Point Software and BII Railway Transportation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.