Correlation Between Check Point and Rapid7

Can any of the company-specific risk be diversified away by investing in both Check Point and Rapid7 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 Rapid7 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 Rapid7 Inc, you can compare the effects of market volatilities on Check Point and Rapid7 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 Rapid7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Rapid7.

Diversification Opportunities for Check Point and Rapid7

-0.24

Correlation Coefficient

Check Point  Rapid7

Very good diversification

The 3 months correlation between Check and Rapid7 is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Rapid7 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapid7 Inc 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 Rapid7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapid7 Inc has no effect on the direction of Check Point i.e., Check Point and Rapid7 go up and down completely randomly.

Pair Corralation between Check Point and Rapid7

Given the investment horizon of 90 days Check Point is expected to generate 1.2 times less return on investment than Rapid7. But when comparing it to its historical volatility, Check Point Software is 1.66 times less risky than Rapid7. It trades about 0.08 of its potential returns per unit of risk. Rapid7 Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,160  in Rapid7 Inc on August 30, 2024 and sell it today you would earn a total of  93.00  from holding Rapid7 Inc or generate 2.24% return on investment over 90 days.

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

Check Point Software  vs.  Rapid7 Inc

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.

Rapid7 Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid7 Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Rapid7 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Rapid7

The main advantage of trading using opposite Check Point and Rapid7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, Rapid7 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 Rapid7 will offset losses from the drop in Rapid7's long position.

The idea behind Check Point Software and Rapid7 Inc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.