Correlation Between Check Point and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Check Point and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on Check Point and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and SMA Solar.
Diversification Opportunities for Check Point and SMA Solar
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Check and SMA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Check Point i.e., Check Point and SMA Solar go up and down completely randomly.
Pair Corralation between Check Point and SMA Solar
Assuming the 90 days trading horizon Check Point is expected to generate 2.11 times less return on investment than SMA Solar. But when comparing it to its historical volatility, Check Point Software is 2.95 times less risky than SMA Solar. It trades about 0.18 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,219 in SMA Solar Technology on September 21, 2024 and sell it today you would earn a total of 129.00 from holding SMA Solar Technology or generate 10.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Check Point Software vs. SMA Solar Technology
Performance |
| Timeline |
| Check Point Software |
| SMA Solar Technology |
Check Point and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and SMA Solar
The main advantage of trading using opposite Check Point and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| Check Point vs. Toyota Motor Corp | Check Point vs. SoftBank Group Corp | Check Point vs. OTP Bank Nyrt | Check Point vs. Hershey Co |
| SMA Solar vs. Samsung Electronics Co | SMA Solar vs. Samsung Electronics Co | SMA Solar vs. Hyundai Motor | SMA Solar vs. Reliance Industries Ltd |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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