Correlation Between Euronet Worldwide and F5 Networks

Can any of the company-specific risk be diversified away by investing in both Euronet Worldwide and F5 Networks 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 Euronet Worldwide and F5 Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Euronet Worldwide and F5 Networks, you can compare the effects of market volatilities on Euronet Worldwide and F5 Networks 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 Euronet Worldwide with a short position of F5 Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euronet Worldwide and F5 Networks.

Diversification Opportunities for Euronet Worldwide and F5 Networks

0.64

Correlation Coefficient

Euronet Worldwide  F5 Networks

Poor diversification

The 3 months correlation between Euronet and FFIV is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Euronet Worldwide and F5 Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F5 Networks and Euronet Worldwide 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 Euronet Worldwide are associated (or correlated) with F5 Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F5 Networks has no effect on the direction of Euronet Worldwide i.e., Euronet Worldwide and F5 Networks go up and down completely randomly.

Pair Corralation between Euronet Worldwide and F5 Networks

Given the investment horizon of 90 days Euronet Worldwide is expected to generate 1.06 times more return on investment than F5 Networks. However, Euronet Worldwide is 1.06 times more volatile than F5 Networks. It trades about -0.16 of its potential returns per unit of risk. F5 Networks is currently generating about -0.17 per unit of risk. If you would invest  10,879  in Euronet Worldwide on January 24, 2024 and sell it today you would lose (490.00) from holding Euronet Worldwide or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Euronet Worldwide  vs.  F5 Networks

Euronet Worldwide

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Euronet Worldwide are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Euronet Worldwide may actually be approaching a critical reversion point that can send shares even higher in May 2024.

F5 Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days F5 Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, F5 Networks is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Euronet Worldwide and F5 Networks

The main advantage of trading using opposite Euronet Worldwide and F5 Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronet Worldwide position performs unexpectedly, F5 Networks 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 F5 Networks will offset losses from the drop in F5 Networks' long position.

The idea behind Euronet Worldwide and F5 Networks 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.