Correlation Between Check Point and British American
Can any of the company-specific risk be diversified away by investing in both Check Point and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Check Point and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and British American.
Diversification Opportunities for Check Point and British American
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Check and British is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Check Point i.e., Check Point and British American go up and down completely randomly.
Pair Corralation between Check Point and British American
Assuming the 90 days trading horizon Check Point is expected to generate 2.29 times less return on investment than British American. In addition to that, Check Point is 1.2 times more volatile than British American Tobacco. It trades about 0.04 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.11 per unit of volatility. If you would invest 2,770 in British American Tobacco on August 29, 2024 and sell it today you would earn a total of 983.00 from holding British American Tobacco or generate 35.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.58% |
| Values | Daily Returns |
Check Point Software vs. British American Tobacco
Performance |
| Timeline |
| Check Point Software |
| British American Tobacco |
Check Point and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and British American
The main advantage of trading using opposite Check Point and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Check Point vs. Toyota Motor Corp | Check Point vs. OTP Bank Nyrt | Check Point vs. Cognizant Technology Solutions | Check Point vs. Lendinvest PLC |
| British American vs. Lendinvest PLC | British American vs. Neometals | British American vs. Coor Service Management | British American vs. Albion Technology General |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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