Correlation Between Check Point and Premier Foods

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

Diversification Opportunities for Check Point and Premier Foods

0.35

Correlation Coefficient

Check Point  Premier Foods

Weak diversification

The 3 months correlation between Check and Premier is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Check Point i.e., Check Point and Premier Foods go up and down completely randomly.

Pair Corralation between Check Point and Premier Foods

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.26 times more return on investment than Premier Foods. However, Check Point is 1.26 times more volatile than Premier Foods PLC. It trades about 0.04 of its potential returns per unit of risk. Premier Foods PLC is currently generating about -0.01 per unit of risk. If you would invest  21,101  in Check Point Software on April 22, 2025 and sell it today you would earn a total of  668.00  from holding Check Point Software or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Check Point Software  vs.  Premier Foods PLC

Check Point Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Premier Foods PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and Premier Foods

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

The idea behind Check Point Software and Premier Foods PLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.