Correlation Between Check Point and PREMIER FOODS

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

Diversification Opportunities for Check Point and PREMIER FOODS

0.25

Correlation Coefficient

Check Point  PREMIER FOODS

Modest diversification

The 3 months correlation between Check and PREMIER is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of Check Point i.e., Check Point and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Check Point and PREMIER FOODS

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.12 times more return on investment than PREMIER FOODS. However, Check Point is 1.12 times more volatile than PREMIER FOODS. It trades about 0.02 of its potential returns per unit of risk. PREMIER FOODS is currently generating about -0.02 per unit of risk. If you would invest  21,030  in Check Point Software on December 30, 2024 and sell it today you would earn a total of  120.00  from holding Check Point Software or generate 0.57% 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.  PREMIER FOODS

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

PREMIER FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and PREMIER FOODS

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

The idea behind Check Point Software and PREMIER FOODS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.