Correlation Between Check Point and GLOBUS MEDICAL-A

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

Diversification Opportunities for Check Point and GLOBUS MEDICAL-A

-0.32

Correlation Coefficient

Check Point  GLOBUS MEDICAL-A

Very good diversification

The 3 months correlation between Check and GLOBUS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and GLOBUS MEDICAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBUS MEDICAL A 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 GLOBUS MEDICAL-A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBUS MEDICAL A has no effect on the direction of Check Point i.e., Check Point and GLOBUS MEDICAL-A go up and down completely randomly.

Pair Corralation between Check Point and GLOBUS MEDICAL-A

Assuming the 90 days trading horizon Check Point is expected to generate 22.96 times less return on investment than GLOBUS MEDICAL-A. But when comparing it to its historical volatility, Check Point Software is 1.04 times less risky than GLOBUS MEDICAL-A. It trades about 0.01 of its potential returns per unit of risk. GLOBUS MEDICAL A is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,350  in GLOBUS MEDICAL A on October 8, 2024 and sell it today you would earn a total of  1,550  from holding GLOBUS MEDICAL A or generate 24.41% 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.  GLOBUS MEDICAL A

Check Point Software

Risk-Adjusted Performance

0 of 100

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.

GLOBUS MEDICAL A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBUS MEDICAL A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, GLOBUS MEDICAL-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and GLOBUS MEDICAL-A

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

The idea behind Check Point Software and GLOBUS MEDICAL A 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.