Correlation Between Check Point and TechnipFMC PLC

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

Diversification Opportunities for Check Point and TechnipFMC PLC

-0.46

Correlation Coefficient

Check Point  TechnipFMC PLC

Very good diversification

The 3 months correlation between Check and TechnipFMC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC 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 TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of Check Point i.e., Check Point and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Check Point and TechnipFMC PLC

Assuming the 90 days trading horizon Check Point is expected to generate 11.46 times less return on investment than TechnipFMC PLC. In addition to that, Check Point is 1.04 times more volatile than TechnipFMC PLC. It trades about 0.02 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.21 per unit of volatility. If you would invest  2,279  in TechnipFMC PLC on September 5, 2024 and sell it today you would earn a total of  726.00  from holding TechnipFMC PLC or generate 31.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Check Point Software  vs.  TechnipFMC PLC

Check Point Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

TechnipFMC PLC

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Check Point and TechnipFMC PLC

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

The idea behind Check Point Software and TechnipFMC PLC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.