Correlation Between Euronet Worldwide and Evertec

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

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

Diversification Opportunities for Euronet Worldwide and Evertec

0.67

Correlation Coefficient

Euronet Worldwide  Evertec

Poor diversification

The 3 months correlation between Euronet and Evertec is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Euronet Worldwide and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec 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 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 Euronet Worldwide i.e., Euronet Worldwide and Evertec go up and down completely randomly.

Pair Corralation between Euronet Worldwide and Evertec

Given the investment horizon of 90 days Euronet Worldwide is expected to under-perform the Evertec. But the stock apears to be less risky and, when comparing its historical volatility, Euronet Worldwide is 1.25 times less risky than Evertec. The stock trades about -0.02 of its potential returns per unit of risk. The Evertec is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,600  in Evertec on November 29, 2024 and sell it today you would earn a total of  160.96  from holding Evertec or generate 4.47% return on investment over 90 days.

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

Euronet Worldwide  vs.  Evertec

Euronet Worldwide

Risk-Adjusted Performance

Very Weak

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

Evertec

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 3 (%) 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 March 2025.

Pair Trading with Euronet Worldwide and Evertec

The main advantage of trading using opposite Euronet Worldwide and Evertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronet Worldwide 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 Euronet Worldwide 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.