Correlation Between Check Point and BlackBerry

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

Diversification Opportunities for Check Point and BlackBerry

-0.23

Correlation Coefficient

Check Point  BlackBerry

Very good diversification

The 3 months correlation between Check and BlackBerry is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry 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 BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Check Point i.e., Check Point and BlackBerry go up and down completely randomly.

Pair Corralation between Check Point and BlackBerry

Given the investment horizon of 90 days Check Point Software is expected to under-perform the BlackBerry. But the stock apears to be less risky and, when comparing its historical volatility, Check Point Software is 5.15 times less risky than BlackBerry. The stock trades about -0.22 of its potential returns per unit of risk. The BlackBerry is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  247.00  in BlackBerry on January 19, 2024 and sell it today you would earn a total of  29.00  from holding BlackBerry or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Check Point Software  vs.  BlackBerry

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.

BlackBerry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackBerry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Check Point and BlackBerry

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

The idea behind Check Point Software and BlackBerry 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.