Correlation Between Evertec and VeriSign

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

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

Diversification Opportunities for Evertec and VeriSign

0.57

Correlation Coefficient

Evertec  VeriSign

Very weak diversification

The 3 months correlation between Evertec and VeriSign is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Evertec i.e., Evertec and VeriSign go up and down completely randomly.

Pair Corralation between Evertec and VeriSign

Given the investment horizon of 90 days Evertec is expected to generate 1.45 times more return on investment than VeriSign. However, Evertec is 1.45 times more volatile than VeriSign. It trades about -0.03 of its potential returns per unit of risk. VeriSign is currently generating about -0.09 per unit of risk. If you would invest  4,067  in Evertec on February 2, 2024 and sell it today you would lose (493.00) from holding Evertec or give up 12.12% of portfolio value over 90 days.

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

Evertec  vs.  VeriSign

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.

VeriSign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VeriSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Evertec and VeriSign

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

The idea behind Evertec and VeriSign 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.