Correlation Between Check Point and DAIRY FARM

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

Diversification Opportunities for Check Point and DAIRY FARM

-0.37

Correlation Coefficient

Check Point  DAIRY FARM

Very good diversification

The 3 months correlation between Check and DAIRY is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Check Point i.e., Check Point and DAIRY FARM go up and down completely randomly.

Pair Corralation between Check Point and DAIRY FARM

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.73 times more return on investment than DAIRY FARM. However, Check Point Software is 1.37 times less risky than DAIRY FARM. It trades about 0.17 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.01 per unit of risk. If you would invest  18,030  in Check Point Software on December 22, 2024 and sell it today you would earn a total of  3,160  from holding Check Point Software or generate 17.53% 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.  DAIRY FARM INTL

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.

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Check Point and DAIRY FARM

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

The idea behind Check Point Software and DAIRY FARM INTL 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.