Correlation Between Auto Trader and Check Point

Can any of the company-specific risk be diversified away by investing in both Auto Trader and Check Point 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 Auto Trader and Check Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auto Trader Group and Check Point Software, you can compare the effects of market volatilities on Auto Trader and Check Point 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 Auto Trader with a short position of Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Check Point.

Diversification Opportunities for Auto Trader and Check Point

0.45

Correlation Coefficient

Auto Trader  Check Point

Very weak diversification

The 3 months correlation between Auto and Check is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software and Auto Trader 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 Auto Trader Group are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Auto Trader i.e., Auto Trader and Check Point go up and down completely randomly.

Pair Corralation between Auto Trader and Check Point

Assuming the 90 days trading horizon Auto Trader is expected to generate 1.71 times less return on investment than Check Point. In addition to that, Auto Trader is 1.32 times more volatile than Check Point Software. It trades about 0.02 of its total potential returns per unit of risk. Check Point Software is currently generating about 0.05 per unit of volatility. If you would invest  18,135  in Check Point Software on April 25, 2025 and sell it today you would earn a total of  765.00  from holding Check Point Software or generate 4.22% return on investment over 90 days.

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

Auto Trader Group  vs.  Check Point Software

Auto Trader Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Auto Trader Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Auto Trader and Check Point

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

The idea behind Auto Trader Group and Check Point Software 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.