Correlation Between Check Point and Electrocomponents

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

Diversification Opportunities for Check Point and Electrocomponents

0.0

Correlation Coefficient

Check Point  Electrocomponents

Pay attention - limited upside

The 3 months correlation between Check and Electrocomponents is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Electrocomponents Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrocomponents 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 Electrocomponents. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrocomponents Plc has no effect on the direction of Check Point i.e., Check Point and Electrocomponents go up and down completely randomly.

Pair Corralation between Check Point and Electrocomponents

If you would invest  0.00  in Electrocomponents Plc on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Electrocomponents Plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Check Point Software  vs.  Electrocomponents 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Electrocomponents Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrocomponents Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Electrocomponents is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Check Point and Electrocomponents

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

The idea behind Check Point Software and Electrocomponents 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.