Correlation Between Check Point and Graham Holdings

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

Diversification Opportunities for Check Point and Graham Holdings

-0.32

Correlation Coefficient

Check Point  Graham Holdings

Very good diversification

The 3 months correlation between Check and Graham is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Graham Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham 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 Graham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings has no effect on the direction of Check Point i.e., Check Point and Graham Holdings go up and down completely randomly.

Pair Corralation between Check Point and Graham Holdings

Assuming the 90 days trading horizon Check Point is expected to generate 7.75 times less return on investment than Graham Holdings. But when comparing it to its historical volatility, Check Point Software is 1.09 times less risky than Graham Holdings. It trades about 0.03 of its potential returns per unit of risk. Graham Holdings Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  66,837  in Graham Holdings Co on September 13, 2024 and sell it today you would earn a total of  22,663  from holding Graham Holdings Co or generate 33.91% 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.  Graham Holdings Co

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.

Graham Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Graham Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Graham Holdings

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

The idea behind Check Point Software and Graham Holdings Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.