Correlation Between Check Point and Software Circle

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

Diversification Opportunities for Check Point and Software Circle

0.54

Correlation Coefficient

Check Point  Software Circle

Very weak diversification

The 3 months correlation between Check and Software is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle 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 Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of Check Point i.e., Check Point and Software Circle go up and down completely randomly.

Pair Corralation between Check Point and Software Circle

Assuming the 90 days trading horizon Check Point Software is expected to generate 0.65 times more return on investment than Software Circle. However, Check Point Software is 1.53 times less risky than Software Circle. It trades about 0.07 of its potential returns per unit of risk. Software Circle plc is currently generating about 0.03 per unit of risk. If you would invest  20,998  in Check Point Software on April 24, 2025 and sell it today you would earn a total of  1,187  from holding Check Point Software or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Check Point Software  vs.  Software Circle plc

Check Point Software

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Software Circle plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Software Circle is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Check Point and Software Circle

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

The idea behind Check Point Software and Software Circle 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.