Correlation Between Check Point and Diversified Healthcare

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

Diversification Opportunities for Check Point and Diversified Healthcare

0.12

Correlation Coefficient

Check Point  Diversified Healthcare

Average diversification

The 3 months correlation between Check and Diversified is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Diversified Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Healthcare 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 Diversified Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Healthcare has no effect on the direction of Check Point i.e., Check Point and Diversified Healthcare go up and down completely randomly.

Pair Corralation between Check Point and Diversified Healthcare

Assuming the 90 days trading horizon Check Point is expected to generate 9.75 times less return on investment than Diversified Healthcare. But when comparing it to its historical volatility, Check Point Software is 3.05 times less risky than Diversified Healthcare. It trades about 0.05 of its potential returns per unit of risk. Diversified Healthcare Trust is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Diversified Healthcare Trust on April 25, 2025 and sell it today you would earn a total of  101.00  from holding Diversified Healthcare Trust or generate 51.01% return on investment over 90 days.

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

Check Point Software  vs.  Diversified Healthcare Trust

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.

Diversified Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Healthcare Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Diversified Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Check Point and Diversified Healthcare

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

The idea behind Check Point Software and Diversified Healthcare Trust 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.