Correlation Between Check Point and PagSeguro Digital

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

Diversification Opportunities for Check Point and PagSeguro Digital

0.15

Correlation Coefficient

Check Point  PagSeguro Digital

Average diversification

The 3 months correlation between Check and PagSeguro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital 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 PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of Check Point i.e., Check Point and PagSeguro Digital go up and down completely randomly.

Pair Corralation between Check Point and PagSeguro Digital

Given the investment horizon of 90 days Check Point Software is expected to generate 0.96 times more return on investment than PagSeguro Digital. However, Check Point Software is 1.04 times less risky than PagSeguro Digital. It trades about -0.03 of its potential returns per unit of risk. PagSeguro Digital is currently generating about -0.2 per unit of risk. If you would invest  19,250  in Check Point Software on August 30, 2024 and sell it today you would lose (1,095) from holding Check Point Software or give up 5.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  PagSeguro Digital

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. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

PagSeguro Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PagSeguro Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Check Point and PagSeguro Digital

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

The idea behind Check Point Software and PagSeguro Digital 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.