Correlation Between Evolv Technologies and NAPCO Security

Can any of the company-specific risk be diversified away by investing in both Evolv Technologies and NAPCO Security 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 NAPCO Security 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 NAPCO Security Technologies, you can compare the effects of market volatilities on Evolv Technologies and NAPCO Security 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 NAPCO Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolv Technologies and NAPCO Security.

Diversification Opportunities for Evolv Technologies and NAPCO Security

0.04

Correlation Coefficient

Evolv Technologies  NAPCO Security

Significant diversification

The 3 months correlation between Evolv and NAPCO is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Evolv Technologies Holdings and NAPCO Security Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAPCO Security Techn 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 NAPCO Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAPCO Security Techn has no effect on the direction of Evolv Technologies i.e., Evolv Technologies and NAPCO Security go up and down completely randomly.

Pair Corralation between Evolv Technologies and NAPCO Security

Given the investment horizon of 90 days Evolv Technologies Holdings is expected to generate 1.41 times more return on investment than NAPCO Security. However, Evolv Technologies is 1.41 times more volatile than NAPCO Security Technologies. It trades about 0.04 of its potential returns per unit of risk. NAPCO Security Technologies is currently generating about 0.01 per unit of risk. If you would invest  265.00  in Evolv Technologies Holdings on December 2, 2024 and sell it today you would earn a total of  89.00  from holding Evolv Technologies Holdings or generate 33.58% return on investment over 90 days.

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

Evolv Technologies Holdings  vs.  NAPCO Security Technologies

Evolv Technologies

Risk-Adjusted Performance

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

NAPCO Security Techn

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAPCO Security Technologies 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Evolv Technologies and NAPCO Security

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

The idea behind Evolv Technologies Holdings and NAPCO Security Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.