Correlation Between Check Point and BASF SE

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

Diversification Opportunities for Check Point and BASF SE

0.37

Correlation Coefficient

Check Point  BASF SE

Weak diversification

The 3 months correlation between Check and BASF is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Check Point i.e., Check Point and BASF SE go up and down completely randomly.

Pair Corralation between Check Point and BASF SE

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.62 times more return on investment than BASF SE. However, Check Point Software is 1.61 times less risky than BASF SE. It trades about 0.06 of its potential returns per unit of risk. BASF SE is currently generating about 0.02 per unit of risk. If you would invest  11,956  in Check Point Software on September 12, 2024 and sell it today you would earn a total of  5,759  from holding Check Point Software or generate 48.17% return on investment over 90 days.

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

Check Point Software  vs.  BASF SE

Check Point Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 2 (%) 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.

BASF SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BASF SE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Check Point and BASF SE

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

The idea behind Check Point Software and BASF SE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.