Correlation Between Check Point and Swiss Life

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

Diversification Opportunities for Check Point and Swiss Life

-0.15

Correlation Coefficient

Check Point  Swiss Life

Good diversification

The 3 months correlation between Check and Swiss is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Check Point i.e., Check Point and Swiss Life go up and down completely randomly.

Pair Corralation between Check Point and Swiss Life

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the Swiss Life. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 1.09 times less risky than Swiss Life. The stock trades about -0.02 of its potential returns per unit of risk. The Swiss Life Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,700  in Swiss Life Holding on October 24, 2024 and sell it today you would earn a total of  80.00  from holding Swiss Life Holding or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Check Point Software  vs.  Swiss Life Holding

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 latest stock price disarray, may contribute to short-term losses for the investors.

Swiss Life Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Swiss Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Check Point and Swiss Life

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

The idea behind Check Point Software and Swiss Life Holding 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.