Correlation Between Evolv Technologies and Five Below

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

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

Diversification Opportunities for Evolv Technologies and Five Below

-0.02

Correlation Coefficient

Evolv Technologies  Five Below

Good diversification

The 3 months correlation between Evolv and Five is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Evolv Technologies Holdings and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and Evolv Technologies 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 Evolv Technologies Holdings are associated (or correlated) with Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Evolv Technologies i.e., Evolv Technologies and Five Below go up and down completely randomly.

Pair Corralation between Evolv Technologies and Five Below

Given the investment horizon of 90 days Evolv Technologies Holdings is expected to under-perform the Five Below. In addition to that, Evolv Technologies is 2.16 times more volatile than Five Below. It trades about -0.23 of its total potential returns per unit of risk. Five Below is currently generating about -0.34 per unit of volatility. If you would invest  16,277  in Five Below on February 5, 2024 and sell it today you would lose (1,796) from holding Five Below or give up 11.03% of portfolio value over 90 days.

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

Evolv Technologies Holdings  vs.  Five Below

Evolv Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Five Below

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Five Below 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 rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Evolv Technologies and Five Below

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

The idea behind Evolv Technologies Holdings and Five Below 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.