Correlation Between Check Point and Polar Capital

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

Diversification Opportunities for Check Point and Polar Capital

-0.42

Correlation Coefficient

Check Point  Polar Capital

Very good diversification

The 3 months correlation between Check and Polar is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Check Point i.e., Check Point and Polar Capital go up and down completely randomly.

Pair Corralation between Check Point and Polar Capital

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.24 times more return on investment than Polar Capital. However, Check Point is 1.24 times more volatile than Polar Capital Technology. It trades about 0.12 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.08 per unit of risk. If you would invest  18,413  in Check Point Software on September 25, 2024 and sell it today you would earn a total of  497.00  from holding Check Point Software or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Check Point Software  vs.  Polar Capital Technology

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.

Polar Capital Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Polar Capital

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

The idea behind Check Point Software and Polar Capital Technology 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.