Correlation Between Check Point and RETAIL FOOD

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

Diversification Opportunities for Check Point and RETAIL FOOD

-0.33

Correlation Coefficient

Check Point  RETAIL FOOD

Very good diversification

The 3 months correlation between Check and RETAIL is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Check Point i.e., Check Point and RETAIL FOOD go up and down completely randomly.

Pair Corralation between Check Point and RETAIL FOOD

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.37 times more return on investment than RETAIL FOOD. However, Check Point Software is 2.68 times less risky than RETAIL FOOD. It trades about 0.23 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.22 per unit of risk. If you would invest  17,190  in Check Point Software on September 29, 2024 and sell it today you would earn a total of  880.00  from holding Check Point Software or generate 5.12% 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.  RETAIL FOOD GROUP

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Check Point and RETAIL FOOD

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

The idea behind Check Point Software and RETAIL FOOD GROUP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.