Correlation Between Check Point and Brinker International

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

Diversification Opportunities for Check Point and Brinker International

-0.24

Correlation Coefficient

Check Point  Brinker International

Very good diversification

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

Pair Corralation between Check Point and Brinker International

Assuming the 90 days trading horizon Check Point is expected to generate 13.94 times less return on investment than Brinker International. But when comparing it to its historical volatility, Check Point Software is 1.36 times less risky than Brinker International. It trades about 0.03 of its potential returns per unit of risk. Brinker International is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  6,350  in Brinker International on September 12, 2024 and sell it today you would earn a total of  5,650  from holding Brinker International or generate 88.98% 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.  Brinker International

Check Point Software

Risk-Adjusted Performance

2 of 100

Insignificant

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.

Brinker International

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brinker International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Brinker International

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

The idea behind Check Point Software and Brinker International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.