Correlation Between Black Knight and Evertec

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Can any of the company-specific risk be diversified away by investing in both Black Knight and Evertec 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 Black Knight and Evertec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Knight and Evertec, you can compare the effects of market volatilities on Black Knight and Evertec 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 Black Knight with a short position of Evertec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Knight and Evertec.

Diversification Opportunities for Black Knight and Evertec

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Black and Evertec is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Black Knight and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and Black Knight 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 Black Knight are associated (or correlated) with Evertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evertec has no effect on the direction of Black Knight i.e., Black Knight and Evertec go up and down completely randomly.

Pair Corralation between Black Knight and Evertec

Considering the 90-day investment horizon Black Knight is expected to generate 1.08 times more return on investment than Evertec. However, Black Knight is 1.08 times more volatile than Evertec. It trades about 0.05 of its potential returns per unit of risk. Evertec is currently generating about 0.0 per unit of risk. If you would invest  5,827  in Black Knight on December 20, 2023 and sell it today you would earn a total of  1,749  from holding Black Knight or generate 30.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy72.87%
ValuesDaily Returns

Black Knight  vs.  Evertec

 Performance 
       Timeline  
Black Knight 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Evertec 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Evertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Black Knight and Evertec Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Black Knight and Evertec

The main advantage of trading using opposite Black Knight and Evertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Knight position performs unexpectedly, Evertec 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 Evertec will offset losses from the drop in Evertec's long position.
The idea behind Black Knight and Evertec 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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