Correlation Between Check Point and SOFI TECHNOLOGIES

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

Diversification Opportunities for Check Point and SOFI TECHNOLOGIES

-0.13

Correlation Coefficient

Check Point  SOFI TECHNOLOGIES

Good diversification

The 3 months correlation between Check and SOFI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Check Point i.e., Check Point and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Check Point and SOFI TECHNOLOGIES

Assuming the 90 days trading horizon Check Point is expected to generate 11.97 times less return on investment than SOFI TECHNOLOGIES. But when comparing it to its historical volatility, Check Point Software is 1.7 times less risky than SOFI TECHNOLOGIES. It trades about 0.05 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  750.00  in SOFI TECHNOLOGIES on September 19, 2024 and sell it today you would earn a total of  826.00  from holding SOFI TECHNOLOGIES or generate 110.13% 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.  SOFI TECHNOLOGIES

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and SOFI TECHNOLOGIES

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

The idea behind Check Point Software and SOFI TECHNOLOGIES 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.