Correlation Between Check Point and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both Check Point and Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications Plc, you can compare the effects of market volatilities on Check Point and Aeorema Communications 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 Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Aeorema Communications.
Diversification Opportunities for Check Point and Aeorema Communications
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Check and Aeorema is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Check Point i.e., Check Point and Aeorema Communications go up and down completely randomly.
Pair Corralation between Check Point and Aeorema Communications
Assuming the 90 days trading horizon Check Point Software is expected to generate 1.32 times more return on investment than Aeorema Communications. However, Check Point is 1.32 times more volatile than Aeorema Communications Plc. It trades about 0.08 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.08 per unit of risk. If you would invest 18,357 in Check Point Software on November 7, 2024 and sell it today you would earn a total of 2,963 from holding Check Point Software or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Check Point Software vs. Aeorema Communications Plc
Performance |
| Timeline |
| Check Point Software |
| Aeorema Communications |
Check Point and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Aeorema Communications
The main advantage of trading using opposite Check Point and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.| Check Point vs. Centaur Media | Check Point vs. LBG Media PLC | Check Point vs. Air Products Chemicals | Check Point vs. Intermediate Capital Group |
| Aeorema Communications vs. Sovereign Metals | Aeorema Communications vs. Lindsell Train Investment | Aeorema Communications vs. Golden Metal Resources | Aeorema Communications vs. AMG Advanced Metallurgical |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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