Correlation Between Check Point and Zhengzhou Coal

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

Diversification Opportunities for Check Point and Zhengzhou Coal

0.01

Correlation Coefficient

Check Point  Zhengzhou Coal

Significant diversification

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

Pair Corralation between Check Point and Zhengzhou Coal

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the Zhengzhou Coal. In addition to that, Check Point is 1.6 times more volatile than Zhengzhou Coal Mining. It trades about -0.01 of its total potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.05 per unit of volatility. If you would invest  122.00  in Zhengzhou Coal Mining on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Zhengzhou Coal Mining or generate 3.28% return on investment over 90 days.

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

Check Point Software  vs.  Zhengzhou Coal Mining

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

Zhengzhou Coal Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zhengzhou Coal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Check Point and Zhengzhou Coal

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

The idea behind Check Point Software and Zhengzhou Coal Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.