Correlation Between Check Point and Future Metals

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

Diversification Opportunities for Check Point and Future Metals

-0.21

Correlation Coefficient

Check Point  Future Metals

Very good diversification

The 3 months correlation between Check and Future is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL 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 Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Check Point i.e., Check Point and Future Metals go up and down completely randomly.

Pair Corralation between Check Point and Future Metals

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.63 times more return on investment than Future Metals. However, Check Point Software is 1.58 times less risky than Future Metals. It trades about 0.01 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.11 per unit of risk. If you would invest  19,168  in Check Point Software on September 28, 2024 and sell it today you would lose (135.00) from holding Check Point Software or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Check Point Software  vs.  Future Metals NL

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.

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL 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 Future Metals

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

The idea behind Check Point Software and Future Metals NL 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.