Correlation Between Check Point and Thyssenkrupp

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

Diversification Opportunities for Check Point and Thyssenkrupp

-0.01

Correlation Coefficient

Check Point  Thyssenkrupp

Good diversification

The 3 months correlation between Check and Thyssenkrupp is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Check Point i.e., Check Point and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Check Point and Thyssenkrupp

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 1.76 times less risky than Thyssenkrupp. The stock trades about -0.05 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  314.00  in thyssenkrupp AG on October 15, 2024 and sell it today you would earn a total of  58.00  from holding thyssenkrupp AG or generate 18.47% return on investment over 90 days.

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

Check Point Software  vs.  thyssenkrupp AG

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

thyssenkrupp AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Thyssenkrupp

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

The idea behind Check Point Software and thyssenkrupp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.