Correlation Between Amdocs and Check Point

Can any of the company-specific risk be diversified away by investing in both Amdocs and Check Point 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 Amdocs and Check Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amdocs and Check Point Software, you can compare the effects of market volatilities on Amdocs and Check Point 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 Amdocs with a short position of Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amdocs and Check Point.

Diversification Opportunities for Amdocs and Check Point

0.69

Correlation Coefficient

Amdocs  Check Point

Poor diversification

The 3 months correlation between Amdocs and Check is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amdocs and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software and Amdocs 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 Amdocs are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Amdocs i.e., Amdocs and Check Point go up and down completely randomly.

Pair Corralation between Amdocs and Check Point

Considering the 90-day investment horizon Amdocs is expected to under-perform the Check Point. But the stock apears to be less risky and, when comparing its historical volatility, Amdocs is 1.39 times less risky than Check Point. The stock trades about -0.05 of its potential returns per unit of risk. The Check Point Software is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  21,802  in Check Point Software on December 2, 2024 and sell it today you would earn a total of  224.00  from holding Check Point Software or generate 1.03% return on investment over 90 days.

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

Amdocs  vs.  Check Point Software

Amdocs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amdocs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Amdocs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Check Point reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amdocs and Check Point

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

The idea behind Amdocs and Check Point Software 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.