Correlation Between Check Point and Gold Road

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

Diversification Opportunities for Check Point and Gold Road

0.22

Correlation Coefficient

Check Point  Gold Road

Modest diversification

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

Pair Corralation between Check Point and Gold Road

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.53 times more return on investment than Gold Road. However, Check Point Software is 1.87 times less risky than Gold Road. It trades about 0.06 of its potential returns per unit of risk. Gold Road Resources is currently generating about 0.02 per unit of risk. If you would invest  11,930  in Check Point Software on September 29, 2024 and sell it today you would earn a total of  6,140  from holding Check Point Software or generate 51.47% 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.  Gold Road Resources

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 uncertain basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gold Road Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Gold Road

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

The idea behind Check Point Software and Gold Road Resources 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.