Correlation Between Check Point and Aeorema Communications

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

Diversification Opportunities for Check Point and Aeorema Communications

-0.11

Correlation Coefficient

Check Point  Aeorema Communications

Good diversification

The 3 months correlation between Check and Aeorema is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Check Point i.e., Check Point and Aeorema Communications go up and down completely randomly.

Pair Corralation between Check Point and Aeorema Communications

Assuming the 90 days trading horizon Check Point is expected to generate 3.88 times less return on investment than Aeorema Communications. In addition to that, Check Point is 1.09 times more volatile than Aeorema Communications Plc. It trades about 0.12 of its total potential returns per unit of risk. Aeorema Communications Plc is currently generating about 0.51 per unit of volatility. If you would invest  5,450  in Aeorema Communications Plc on September 25, 2024 and sell it today you would earn a total of  650.00  from holding Aeorema Communications Plc or generate 11.93% return on investment over 90 days.

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

Check Point Software  vs.  Aeorema Communications Plc

Check Point Software

Risk-Adjusted Performance

0 of 100

Very 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 comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aeorema Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aeorema Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Check Point and Aeorema Communications

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

The idea behind Check Point Software and Aeorema Communications 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.