Correlation Between Check Point and Home Depot
Can any of the company-specific risk be diversified away by investing in both Check Point and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Check Point and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Home Depot.
Diversification Opportunities for Check Point and Home Depot
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Check and Home is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Check Point i.e., Check Point and Home Depot go up and down completely randomly.
Pair Corralation between Check Point and Home Depot
Given the investment horizon of 90 days Check Point Software is expected to generate 0.6 times more return on investment than Home Depot. However, Check Point Software is 1.65 times less risky than Home Depot. It trades about -0.11 of its potential returns per unit of risk. Home Depot is currently generating about -0.49 per unit of risk. If you would invest 16,429 in Check Point Software on January 25, 2024 and sell it today you would lose (329.00) from holding Check Point Software or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Check Point Software vs. Home Depot
Performance |
| Timeline |
| Check Point Software |
| Home Depot |
Check Point and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Home Depot
The main advantage of trading using opposite Check Point and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Check Point vs. Rapid7 Inc | Check Point vs. Tenable Holdings | Check Point vs. Okta Inc | Check Point vs. WixCom |
| Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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