Correlation Between Check Point and Hongkong Land

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

Diversification Opportunities for Check Point and Hongkong Land

-0.37

Correlation Coefficient

Check Point  Hongkong Land

Very good diversification

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

Pair Corralation between Check Point and Hongkong Land

Assuming the 90 days trading horizon Check Point is expected to generate 10.49 times less return on investment than Hongkong Land. But when comparing it to its historical volatility, Check Point Software is 1.4 times less risky than Hongkong Land. It trades about 0.02 of its potential returns per unit of risk. Hongkong Land Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Hongkong Land Holdings on September 20, 2024 and sell it today you would earn a total of  96.00  from holding Hongkong Land Holdings or generate 29.27% 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.  Hongkong Land Holdings

Check Point Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 1 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Hongkong Land Holdings

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Check Point and Hongkong Land

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

The idea behind Check Point Software and Hongkong Land Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..