Correlation Between Check Point and FIREWEED METALS

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

Diversification Opportunities for Check Point and FIREWEED METALS

0.82

Correlation Coefficient

Check Point  FIREWEED METALS

Very poor diversification

The 3 months correlation between Check and FIREWEED is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of Check Point i.e., Check Point and FIREWEED METALS go up and down completely randomly.

Pair Corralation between Check Point and FIREWEED METALS

Assuming the 90 days trading horizon Check Point is expected to generate 1.17 times less return on investment than FIREWEED METALS. But when comparing it to its historical volatility, Check Point Software is 2.17 times less risky than FIREWEED METALS. It trades about 0.22 of its potential returns per unit of risk. FIREWEED METALS P is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  91.00  in FIREWEED METALS P on November 27, 2024 and sell it today you would earn a total of  20.00  from holding FIREWEED METALS P or generate 21.98% return on investment over 90 days.

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

Check Point Software  vs.  FIREWEED METALS P

Check Point Software

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 17 (%) 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.

FIREWEED METALS P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and FIREWEED METALS

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

The idea behind Check Point Software and FIREWEED METALS P 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.