Correlation Between Check Point and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Check Point and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on Check Point and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Smithson Investment.
Diversification Opportunities for Check Point and Smithson Investment
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Check and Smithson is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Check Point i.e., Check Point and Smithson Investment go up and down completely randomly.
Pair Corralation between Check Point and Smithson Investment
Assuming the 90 days trading horizon Check Point Software is expected to generate 1.29 times more return on investment than Smithson Investment. However, Check Point is 1.29 times more volatile than Smithson Investment Trust. It trades about 0.26 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.29 per unit of risk. If you would invest 17,059 in Check Point Software on September 2, 2024 and sell it today you would earn a total of 1,157 from holding Check Point Software or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Check Point Software vs. Smithson Investment Trust
Performance |
| Timeline |
| Check Point Software |
| Smithson Investment Trust |
Check Point and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Smithson Investment
The main advantage of trading using opposite Check Point and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Check Point vs. Toyota Motor Corp | Check Point vs. OTP Bank Nyrt | Check Point vs. Las Vegas Sands | Check Point vs. Yum Brands |
| Smithson Investment vs. Toyota Motor Corp | Smithson Investment vs. SoftBank Group Corp | Smithson Investment vs. OTP Bank Nyrt | Smithson Investment vs. Las Vegas Sands |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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