Correlation Between Check Point and Flowtech Fluidpower

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

Diversification Opportunities for Check Point and Flowtech Fluidpower

0.09

Correlation Coefficient

Check Point  Flowtech Fluidpower

Significant diversification

The 3 months correlation between Check and Flowtech is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Flowtech Fluidpower plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowtech Fluidpower 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 Flowtech Fluidpower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowtech Fluidpower plc has no effect on the direction of Check Point i.e., Check Point and Flowtech Fluidpower go up and down completely randomly.

Pair Corralation between Check Point and Flowtech Fluidpower

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.68 times more return on investment than Flowtech Fluidpower. However, Check Point Software is 1.47 times less risky than Flowtech Fluidpower. It trades about -0.02 of its potential returns per unit of risk. Flowtech Fluidpower plc is currently generating about -0.13 per unit of risk. If you would invest  18,966  in Check Point Software on September 3, 2024 and sell it today you would lose (750.00) from holding Check Point Software or give up 3.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Check Point Software  vs.  Flowtech Fluidpower 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.

Flowtech Fluidpower plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flowtech Fluidpower plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Check Point and Flowtech Fluidpower

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

The idea behind Check Point Software and Flowtech Fluidpower 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.