Correlation Between Check Point and FAST RETAIL

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

Diversification Opportunities for Check Point and FAST RETAIL

0.55

Correlation Coefficient

Check Point  FAST RETAIL

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 RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of Check Point i.e., Check Point and FAST RETAIL go up and down completely randomly.

Pair Corralation between Check Point and FAST RETAIL

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.63 times more return on investment than FAST RETAIL. However, Check Point Software is 1.58 times less risky than FAST RETAIL. It trades about -0.06 of its potential returns per unit of risk. FAST RETAIL ADR is currently generating about -0.04 per unit of risk. If you would invest  17,805  in Check Point Software on October 10, 2024 and sell it today you would lose (270.00) from holding Check Point Software or give up 1.52% of portfolio value over 90 days.

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

Check Point Software  vs.  FAST RETAIL ADR

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 current stock price disarray, may contribute to short-term losses for the investors.

FAST RETAIL ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Check Point and FAST RETAIL

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

The idea behind Check Point Software and FAST RETAIL ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.