Correlation Between Check Point and ArcelorMittal

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

Diversification Opportunities for Check Point and ArcelorMittal

-0.18

Correlation Coefficient

Check Point  ArcelorMittal

Good diversification

The 3 months correlation between Check and ArcelorMittal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal has no effect on the direction of Check Point i.e., Check Point and ArcelorMittal go up and down completely randomly.

Pair Corralation between Check Point and ArcelorMittal

Assuming the 90 days trading horizon Check Point is expected to generate 3.63 times less return on investment than ArcelorMittal. In addition to that, Check Point is 1.02 times more volatile than ArcelorMittal. It trades about 0.04 of its total potential returns per unit of risk. ArcelorMittal is currently generating about 0.15 per unit of volatility. If you would invest  2,019  in ArcelorMittal on September 14, 2024 and sell it today you would earn a total of  421.00  from holding ArcelorMittal or generate 20.85% 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.  ArcelorMittal

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 healthy basic indicators, Check Point is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

ArcelorMittal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and ArcelorMittal

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

The idea behind Check Point Software and ArcelorMittal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.