Correlation Between Check Point and DATAGROUP

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

Diversification Opportunities for Check Point and DATAGROUP

0.3

Correlation Coefficient

Check Point  DATAGROUP

Weak diversification

The 3 months correlation between Check and DATAGROUP is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Check Point i.e., Check Point and DATAGROUP go up and down completely randomly.

Pair Corralation between Check Point and DATAGROUP

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.73 times more return on investment than DATAGROUP. However, Check Point Software is 1.37 times less risky than DATAGROUP. It trades about 0.06 of its potential returns per unit of risk. DATAGROUP SE is currently generating about -0.01 per unit of risk. If you would invest  11,744  in Check Point Software on September 24, 2024 and sell it today you would earn a total of  6,351  from holding Check Point Software or generate 54.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  DATAGROUP SE

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

DATAGROUP SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and DATAGROUP

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

The idea behind Check Point Software and DATAGROUP SE 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.