Correlation Between Check Point and RWE AG

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

Diversification Opportunities for Check Point and RWE AG

0.08

Correlation Coefficient

Check Point  RWE AG

Significant diversification

The 3 months correlation between Check and RWE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of Check Point i.e., Check Point and RWE AG go up and down completely randomly.

Pair Corralation between Check Point and RWE AG

Assuming the 90 days trading horizon Check Point is expected to generate 1.01 times less return on investment than RWE AG. In addition to that, Check Point is 1.22 times more volatile than RWE AG. It trades about 0.16 of its total potential returns per unit of risk. RWE AG is currently generating about 0.2 per unit of volatility. If you would invest  2,817  in RWE AG on December 20, 2024 and sell it today you would earn a total of  494.00  from holding RWE AG or generate 17.54% 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.  RWE AG

Check Point Software

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Check Point displayed solid returns over the last few months and may actually be approaching a breakup point.

RWE AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RWE AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RWE AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and RWE AG

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

The idea behind Check Point Software and RWE AG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.