Correlation Between Check Point and American Homes
Can any of the company-specific risk be diversified away by investing in both Check Point and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on Check Point and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and American Homes.
Diversification Opportunities for Check Point and American Homes
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Check and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Check Point i.e., Check Point and American Homes go up and down completely randomly.
Pair Corralation between Check Point and American Homes
Assuming the 90 days trading horizon Check Point Software is expected to generate 0.81 times more return on investment than American Homes. However, Check Point Software is 1.23 times less risky than American Homes. It trades about 0.33 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.04 per unit of risk. If you would invest 16,445 in Check Point Software on September 19, 2024 and sell it today you would earn a total of 1,570 from holding Check Point Software or generate 9.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Check Point Software vs. American Homes 4
Performance |
| Timeline |
| Check Point Software |
| American Homes 4 |
Check Point and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and American Homes
The main advantage of trading using opposite Check Point and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Check Point vs. Meiko Electronics Co | Check Point vs. METHODE ELECTRONICS | Check Point vs. MCEWEN MINING INC | Check Point vs. Jacquet Metal Service |
| American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. SIVERS SEMICONDUCTORS AB | American Homes vs. NorAm Drilling AS |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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