Correlation Between Trend Micro and Check Point

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

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

Diversification Opportunities for Trend Micro and Check Point

0.69

Correlation Coefficient

Trend Micro  Check Point

Poor diversification

The 3 months correlation between Trend and Check is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Trend Micro ADR 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 Trend Micro 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 Trend Micro ADR 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 Trend Micro i.e., Trend Micro and Check Point go up and down completely randomly.

Pair Corralation between Trend Micro and Check Point

Assuming the 90 days horizon Trend Micro ADR is expected to generate 1.75 times more return on investment than Check Point. However, Trend Micro is 1.75 times more volatile than Check Point Software. It trades about 0.13 of its potential returns per unit of risk. Check Point Software is currently generating about 0.2 per unit of risk. If you would invest  5,558  in Trend Micro ADR on December 27, 2024 and sell it today you would earn a total of  1,307  from holding Trend Micro ADR or generate 23.52% return on investment over 90 days.

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

Trend Micro ADR  vs.  Check Point Software

Trend Micro ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trend Micro ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Trend Micro showed solid returns over the last few months and may actually be approaching a breakup point.

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 Trend Micro and Check Point

The main advantage of trading using opposite Trend Micro and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trend Micro 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 Trend Micro ADR 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.