Correlation Between Evertec and Black Knight

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

Diversification Opportunities for Evertec and Black Knight

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Evertec and Black is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Evertec i.e., Evertec and Black Knight go up and down completely randomly.

Pair Corralation between Evertec and Black Knight

Given the investment horizon of 90 days Evertec is expected to generate 3.24 times less return on investment than Black Knight. But when comparing it to its historical volatility, Evertec is 1.02 times less risky than Black Knight. It trades about 0.01 of its potential returns per unit of risk. Black Knight is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,710  in Black Knight on December 30, 2023 and sell it today you would earn a total of  866.00  from holding Black Knight or generate 12.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy71.26%
ValuesDaily Returns

Evertec  vs.  Black Knight

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

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Evertec and Black Knight

The main advantage of trading using opposite Evertec and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evertec position performs unexpectedly, Black Knight 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 Black Knight will offset losses from the drop in Black Knight's long position.
The idea behind Evertec and Black Knight 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.
Check out your portfolio center.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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