Correlation Between Check Point and Nemetschek

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

Diversification Opportunities for Check Point and Nemetschek

0.13

Correlation Coefficient

Check Point  Nemetschek

Average diversification

The 3 months correlation between Check and Nemetschek is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Nemetschek AG ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nemetschek AG ON 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 Nemetschek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nemetschek AG ON has no effect on the direction of Check Point i.e., Check Point and Nemetschek go up and down completely randomly.

Pair Corralation between Check Point and Nemetschek

Assuming the 90 days trading horizon Check Point is expected to generate 3.63 times less return on investment than Nemetschek. In addition to that, Check Point is 1.47 times more volatile than Nemetschek AG ON. It trades about 0.01 of its total potential returns per unit of risk. Nemetschek AG ON is currently generating about 0.06 per unit of volatility. If you would invest  9,335  in Nemetschek AG ON on September 3, 2024 and sell it today you would earn a total of  485.00  from holding Nemetschek AG ON or generate 5.2% return on investment over 90 days.

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

Check Point Software  vs.  Nemetschek AG ON

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.

Nemetschek AG ON

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nemetschek AG ON are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Nemetschek is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Check Point and Nemetschek

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

The idea behind Check Point Software and Nemetschek AG ON 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.