Correlation Between Check Point and Fast Retailing

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

Diversification Opportunities for Check Point and Fast Retailing

0.55

Correlation Coefficient

Check Point  Fast Retailing

Very weak diversification

The 3 months correlation between Check and Fast is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Check Point i.e., Check Point and Fast Retailing go up and down completely randomly.

Pair Corralation between Check Point and Fast Retailing

Assuming the 90 days trading horizon Check Point is expected to generate 7.02 times less return on investment than Fast Retailing. In addition to that, Check Point is 1.11 times more volatile than Fast Retailing Co. It trades about 0.01 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.09 per unit of volatility. If you would invest  28,830  in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of  3,000  from holding Fast Retailing Co or generate 10.41% return on investment over 90 days.

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

Check Point Software  vs.  Fast Retailing Co

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Fast Retailing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Check Point and Fast Retailing

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

The idea behind Check Point Software and Fast Retailing Co 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.