Correlation Between Equifax and Global Payments

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

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

Diversification Opportunities for Equifax and Global Payments

0.81

Correlation Coefficient

Equifax  Global Payments

Very poor diversification

The 3 months correlation between Equifax and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Equifax 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 Equifax are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Equifax i.e., Equifax and Global Payments go up and down completely randomly.

Pair Corralation between Equifax and Global Payments

Assuming the 90 days horizon Equifax is expected to generate 1.06 times more return on investment than Global Payments. However, Equifax is 1.06 times more volatile than Global Payments. It trades about -0.06 of its potential returns per unit of risk. Global Payments is currently generating about -0.12 per unit of risk. If you would invest  24,360  in Equifax on December 29, 2024 and sell it today you would lose (1,960) from holding Equifax or give up 8.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Equifax  vs.  Global Payments

Equifax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Equifax and Global Payments

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

The idea behind Equifax and Global Payments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.