Correlation Between Check Point and ACI Worldwide

Can any of the company-specific risk be diversified away by investing in both Check Point and ACI Worldwide 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 ACI Worldwide 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 ACI Worldwide, you can compare the effects of market volatilities on Check Point and ACI Worldwide 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 ACI Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and ACI Worldwide.

Diversification Opportunities for Check Point and ACI Worldwide

0.39

Correlation Coefficient

Check Point  ACI Worldwide

Weak diversification

The 3 months correlation between Check and ACI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and ACI Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACI Worldwide 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 ACI Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACI Worldwide has no effect on the direction of Check Point i.e., Check Point and ACI Worldwide go up and down completely randomly.

Pair Corralation between Check Point and ACI Worldwide

Given the investment horizon of 90 days Check Point is expected to generate 1.05 times less return on investment than ACI Worldwide. But when comparing it to its historical volatility, Check Point Software is 1.84 times less risky than ACI Worldwide. It trades about 0.08 of its potential returns per unit of risk. ACI Worldwide is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,607  in ACI Worldwide on January 21, 2024 and sell it today you would earn a total of  588.00  from holding ACI Worldwide or generate 22.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  ACI Worldwide

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ACI Worldwide

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACI Worldwide are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, ACI Worldwide is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Check Point and ACI Worldwide

The main advantage of trading using opposite Check Point and ACI Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, ACI Worldwide 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 ACI Worldwide will offset losses from the drop in ACI Worldwide's long position.

The idea behind Check Point Software and ACI Worldwide pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.