Correlation Between BII Railway and Check Point

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

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

Diversification Opportunities for BII Railway and Check Point

0.42

Correlation Coefficient

BII Railway  Check Point

Very weak diversification

The 3 months correlation between BII and Check is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation 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 BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Check Point go up and down completely randomly.

Pair Corralation between BII Railway and Check Point

Assuming the 90 days horizon BII Railway is expected to generate 1.82 times less return on investment than Check Point. In addition to that, BII Railway is 2.23 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 0.07 per unit of volatility. If you would invest  11,670  in Check Point Software on March 20, 2025 and sell it today you would earn a total of  7,395  from holding Check Point Software or generate 63.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

BII Railway Transportation  vs.  Check Point Software

BII Railway Transpor

Risk-Adjusted Performance

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BII Railway is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Check Point Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BII Railway and Check Point

The main advantage of trading using opposite BII Railway and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.