Correlation Between VeriSign and Evertec

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

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

Diversification Opportunities for VeriSign and Evertec

0.58

Correlation Coefficient

VeriSign  Evertec

Very weak diversification

The 3 months correlation between VeriSign and Evertec is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and VeriSign 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 VeriSign are associated (or correlated) with Evertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evertec has no effect on the direction of VeriSign i.e., VeriSign and Evertec go up and down completely randomly.

Pair Corralation between VeriSign and Evertec

Given the investment horizon of 90 days VeriSign is expected to under-perform the Evertec. But the stock apears to be less risky and, when comparing its historical volatility, VeriSign is 1.11 times less risky than Evertec. The stock trades about -0.36 of its potential returns per unit of risk. The Evertec is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,878  in Evertec on February 1, 2024 and sell it today you would lose (125.00) from holding Evertec or give up 3.22% of portfolio value over 90 days.

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

VeriSign  vs.  Evertec

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.

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 unsteady 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.

Pair Trading with VeriSign and Evertec

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

The idea behind VeriSign and Evertec 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 Stocks Directory module to find actively traded stocks across global markets.