Correlation Between Evertec and Q2 Holdings

Can any of the company-specific risk be diversified away by investing in both Evertec and Q2 Holdings 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 Evertec and Q2 Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Evertec and Q2 Holdings, you can compare the effects of market volatilities on Evertec and Q2 Holdings 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 Evertec with a short position of Q2 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evertec and Q2 Holdings.

Diversification Opportunities for Evertec and Q2 Holdings

-0.54

Correlation Coefficient

Evertec  Q2 Holdings

Excellent diversification

The 3 months correlation between Evertec and QTWO is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Q2 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q2 Holdings and Evertec 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 Evertec are associated (or correlated) with Q2 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q2 Holdings has no effect on the direction of Evertec i.e., Evertec and Q2 Holdings go up and down completely randomly.

Pair Corralation between Evertec and Q2 Holdings

Given the investment horizon of 90 days Evertec is expected to under-perform the Q2 Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Evertec is 1.78 times less risky than Q2 Holdings. The stock trades about -0.12 of its potential returns per unit of risk. The Q2 Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,888  in Q2 Holdings on March 9, 2024 and sell it today you would earn a total of  1,268  from holding Q2 Holdings or generate 25.94% return on investment over 90 days.

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

Evertec  vs.  Q2 Holdings

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 latest inconsistent 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.

Q2 Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Q2 Holdings

The main advantage of trading using opposite Evertec and Q2 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evertec position performs unexpectedly, Q2 Holdings 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 Q2 Holdings will offset losses from the drop in Q2 Holdings' long position.

The idea behind Evertec and Q2 Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.