Correlation Between Check Point and Baker Steel

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

Diversification Opportunities for Check Point and Baker Steel

-0.52

Correlation Coefficient

Check Point  Baker Steel

Excellent diversification

The 3 months correlation between Check and Baker is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Check Point i.e., Check Point and Baker Steel go up and down completely randomly.

Pair Corralation between Check Point and Baker Steel

Assuming the 90 days trading horizon Check Point Software is expected to under-perform the Baker Steel. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 1.01 times less risky than Baker Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Baker Steel Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,950  in Baker Steel Resources on September 3, 2024 and sell it today you would earn a total of  850.00  from holding Baker Steel Resources or generate 17.17% 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.  Baker Steel Resources

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Baker Steel Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Baker Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Baker Steel

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

The idea behind Check Point Software and Baker Steel Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..