Correlation Between K3 Business and Check Point

Can any of the company-specific risk be diversified away by investing in both K3 Business 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 K3 Business and Check Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K3 Business Technology and Check Point Software, you can compare the effects of market volatilities on K3 Business 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 K3 Business with a short position of Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of K3 Business and Check Point.

Diversification Opportunities for K3 Business and Check Point

0.75

Correlation Coefficient

K3 Business  Check Point

Poor diversification

The 3 months correlation between KBT and Check is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding K3 Business Technology 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 K3 Business 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 K3 Business Technology 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 K3 Business i.e., K3 Business and Check Point go up and down completely randomly.

Pair Corralation between K3 Business and Check Point

Assuming the 90 days trading horizon K3 Business Technology is expected to generate 2.46 times more return on investment than Check Point. However, K3 Business is 2.46 times more volatile than Check Point Software. It trades about 0.09 of its potential returns per unit of risk. Check Point Software is currently generating about 0.21 per unit of risk. If you would invest  7,900  in K3 Business Technology on December 30, 2024 and sell it today you would earn a total of  1,600  from holding K3 Business Technology or generate 20.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

K3 Business Technology  vs.  Check Point Software

K3 Business Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K3 Business Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, K3 Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Check Point Software

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Check Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K3 Business and Check Point

The main advantage of trading using opposite K3 Business and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K3 Business 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 K3 Business Technology 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.