Correlation Between Check Point and Fortune Minerals

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

Diversification Opportunities for Check Point and Fortune Minerals

-0.28

Correlation Coefficient

Check Point  Fortune Minerals

Very good diversification

The 3 months correlation between Check and Fortune is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Fortune Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Minerals 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 Fortune Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Minerals has no effect on the direction of Check Point i.e., Check Point and Fortune Minerals go up and down completely randomly.

Pair Corralation between Check Point and Fortune Minerals

Assuming the 90 days trading horizon Check Point is expected to generate 10.25 times less return on investment than Fortune Minerals. But when comparing it to its historical volatility, Check Point Software is 15.06 times less risky than Fortune Minerals. It trades about 0.17 of its potential returns per unit of risk. Fortune Minerals Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.85  in Fortune Minerals Limited on December 21, 2024 and sell it today you would earn a total of  0.30  from holding Fortune Minerals Limited or generate 16.22% 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.  Fortune Minerals Limited

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.

Fortune Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Minerals Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortune Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Fortune Minerals

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

The idea behind Check Point Software and Fortune Minerals Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.