Correlation Between Equifax and Deluxe

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

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

Diversification Opportunities for Equifax and Deluxe

0.79

Correlation Coefficient

Equifax  Deluxe

Poor diversification

The 3 months correlation between Equifax and Deluxe is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe 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 Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of Equifax i.e., Equifax and Deluxe go up and down completely randomly.

Pair Corralation between Equifax and Deluxe

Considering the 90-day investment horizon Equifax is expected to generate 0.82 times more return on investment than Deluxe. However, Equifax is 1.21 times less risky than Deluxe. It trades about -0.03 of its potential returns per unit of risk. Deluxe is currently generating about -0.21 per unit of risk. If you would invest  25,481  in Equifax on December 28, 2024 and sell it today you would lose (1,100) from holding Equifax or give up 4.32% of portfolio value over 90 days.

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

Equifax  vs.  Deluxe

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. In spite of fairly strong technical and fundamental indicators, Equifax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Deluxe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deluxe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Equifax and Deluxe

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

The idea behind Equifax and Deluxe 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .