Correlation Between Check Point and RTL Group

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

Diversification Opportunities for Check Point and RTL Group

0.33

Correlation Coefficient

Check Point  RTL Group

Weak diversification

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

Pair Corralation between Check Point and RTL Group

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.18 times more return on investment than RTL Group. However, Check Point is 1.18 times more volatile than RTL Group SA. It trades about 0.09 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.04 per unit of risk. If you would invest  14,625  in Check Point Software on September 12, 2024 and sell it today you would earn a total of  3,090  from holding Check Point Software or generate 21.13% return on investment over 90 days.

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

Check Point Software  vs.  RTL Group SA

Check Point Software

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Check Point and RTL Group

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

The idea behind Check Point Software and RTL Group SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.