Correlation Between Check Point and Northrop Grumman

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

Diversification Opportunities for Check Point and Northrop Grumman

-0.15

Correlation Coefficient

Check Point  Northrop Grumman

Good diversification

The 3 months correlation between Check and Northrop is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman 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 Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of Check Point i.e., Check Point and Northrop Grumman go up and down completely randomly.

Pair Corralation between Check Point and Northrop Grumman

Assuming the 90 days trading horizon Check Point is expected to generate 1.58 times less return on investment than Northrop Grumman. In addition to that, Check Point is 1.03 times more volatile than Northrop Grumman. It trades about 0.06 of its total potential returns per unit of risk. Northrop Grumman is currently generating about 0.1 per unit of volatility. If you would invest  41,411  in Northrop Grumman on April 23, 2025 and sell it today you would earn a total of  3,649  from holding Northrop Grumman or generate 8.81% 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.  Northrop Grumman

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 newest stock price disarray, may contribute to short-term losses for the investors.

Northrop Grumman

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northrop Grumman are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northrop Grumman may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Check Point and Northrop Grumman

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

The idea behind Check Point Software and Northrop Grumman 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.