Correlation Between INTERSHOP Communications and Check Point

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

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

Diversification Opportunities for INTERSHOP Communications and Check Point

-0.63

Correlation Coefficient

INTERSHOP Communications  Check Point

Excellent diversification

The 3 months correlation between INTERSHOP and Check is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie 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 INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 INTERSHOP Communications i.e., INTERSHOP Communications and Check Point go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and Check Point

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to under-perform the Check Point. In addition to that, INTERSHOP Communications is 2.01 times more volatile than Check Point Software. It trades about -0.09 of its total potential returns per unit of risk. Check Point Software is currently generating about 0.07 per unit of volatility. If you would invest  17,860  in Check Point Software on October 5, 2024 and sell it today you would earn a total of  255.00  from holding Check Point Software or generate 1.43% return on investment over 90 days.

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

INTERSHOP Communications Aktie  vs.  Check Point Software

INTERSHOP Communications

Risk-Adjusted Performance

0 of 100

Modest

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

Check Point Software

Risk-Adjusted Performance

0 of 100

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

Pair Trading with INTERSHOP Communications and Check Point

The main advantage of trading using opposite INTERSHOP Communications and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.