Correlation Between Check Point and CPU SOFTWAREHOUSE

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

Diversification Opportunities for Check Point and CPU SOFTWAREHOUSE

0.22

Correlation Coefficient

Check Point  CPU SOFTWAREHOUSE

Modest diversification

The 3 months correlation between Check and CPU is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of Check Point i.e., Check Point and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between Check Point and CPU SOFTWAREHOUSE

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.17 times more return on investment than CPU SOFTWAREHOUSE. However, Check Point Software is 5.77 times less risky than CPU SOFTWAREHOUSE. It trades about 0.16 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about -0.06 per unit of risk. If you would invest  17,350  in Check Point Software on September 24, 2024 and sell it today you would earn a total of  680.00  from holding Check Point Software or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Check Point Software  vs.  CPU SOFTWAREHOUSE

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.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and CPU SOFTWAREHOUSE

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

The idea behind Check Point Software and CPU SOFTWAREHOUSE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.