Correlation Between Check Point and Empire Metals

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

Diversification Opportunities for Check Point and Empire Metals

0.53

Correlation Coefficient

Check Point  Empire Metals

Very weak diversification

The 3 months correlation between Check and Empire is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Check Point i.e., Check Point and Empire Metals go up and down completely randomly.

Pair Corralation between Check Point and Empire Metals

Assuming the 90 days trading horizon Check Point is expected to generate 2.29 times less return on investment than Empire Metals. But when comparing it to its historical volatility, Check Point Software is 3.36 times less risky than Empire Metals. It trades about 0.08 of its potential returns per unit of risk. Empire Metals Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Empire Metals Limited on September 12, 2024 and sell it today you would earn a total of  300.00  from holding Empire Metals Limited or generate 75.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.75%
Values	Daily Returns

Check Point Software  vs.  Empire Metals Limited

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.

Empire Metals Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Empire Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and Empire Metals

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

The idea behind Check Point Software and Empire Metals Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.