Correlation Between Amdocs and Evertec

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

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

Diversification Opportunities for Amdocs and Evertec

0.24

Correlation Coefficient

Amdocs  Evertec

Modest diversification

The 3 months correlation between Amdocs and Evertec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Amdocs and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and Amdocs 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 Amdocs 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 Amdocs i.e., Amdocs and Evertec go up and down completely randomly.

Pair Corralation between Amdocs and Evertec

Considering the 90-day investment horizon Amdocs is expected to under-perform the Evertec. But the stock apears to be less risky and, when comparing its historical volatility, Amdocs is 1.79 times less risky than Evertec. The stock trades about -0.35 of its potential returns per unit of risk. The Evertec is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,878  in Evertec on January 31, 2024 and sell it today you would lose (43.00) from holding Evertec or give up 1.11% of portfolio value over 90 days.

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

Amdocs  vs.  Evertec

Amdocs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amdocs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Evertec

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, Evertec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amdocs and Evertec

The main advantage of trading using opposite Amdocs and Evertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amdocs 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 Amdocs 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.