Correlation Between Evertec and Green Dot

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

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

Diversification Opportunities for Evertec and Green Dot

-0.37

Correlation Coefficient

Evertec  Green Dot

Very good diversification

The 3 months correlation between Evertec and Green is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot 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 Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of Evertec i.e., Evertec and Green Dot go up and down completely randomly.

Pair Corralation between Evertec and Green Dot

Given the investment horizon of 90 days Evertec is expected to under-perform the Green Dot. But the stock apears to be less risky and, when comparing its historical volatility, Evertec is 1.68 times less risky than Green Dot. The stock trades about -0.01 of its potential returns per unit of risk. The Green Dot is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  919.00  in Green Dot on September 2, 2024 and sell it today you would earn a total of  108.00  from holding Green Dot or generate 11.75% return on investment over 90 days.

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

Evertec  vs.  Green Dot

Evertec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Evertec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Green Dot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Dot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Green Dot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evertec and Green Dot

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

The idea behind Evertec and Green Dot 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.