Correlation Between Check Point and CARSALESCOM

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

Diversification Opportunities for Check Point and CARSALESCOM

-0.32

Correlation Coefficient

Check Point  CARSALESCOM

Very good diversification

The 3 months correlation between Check and CARSALESCOM is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Check Point i.e., Check Point and CARSALESCOM go up and down completely randomly.

Pair Corralation between Check Point and CARSALESCOM

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.45 times more return on investment than CARSALESCOM. However, Check Point is 1.45 times more volatile than CARSALESCOM. It trades about 0.05 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.05 per unit of risk. If you would invest  17,160  in Check Point Software on September 29, 2024 and sell it today you would earn a total of  910.00  from holding Check Point Software or generate 5.3% 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.  CARSALESCOM

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and CARSALESCOM

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

The idea behind Check Point Software and CARSALESCOM 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.