Correlation Between Evolv Technologies and CompoSecure

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

Diversification Opportunities for Evolv Technologies and CompoSecure

0.34

Correlation Coefficient

Evolv Technologies  CompoSecure

Weak diversification

The 3 months correlation between Evolv and CompoSecure is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Evolv Technologies Holdings and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Evolv Technologies i.e., Evolv Technologies and CompoSecure go up and down completely randomly.

Pair Corralation between Evolv Technologies and CompoSecure

Assuming the 90 days horizon Evolv Technologies is expected to generate 85.38 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Evolv Technologies Holdings is 9.27 times less risky than CompoSecure. It trades about 0.01 of its potential returns per unit of risk. CompoSecure is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  105.00  in CompoSecure on October 22, 2024 and sell it today you would earn a total of  316.00  from holding CompoSecure or generate 300.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.4%
Values	Daily Returns

Evolv Technologies Holdings  vs.  CompoSecure

Evolv Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolv Technologies Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Evolv Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

CompoSecure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CompoSecure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CompoSecure is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Evolv Technologies and CompoSecure

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

The idea behind Evolv Technologies Holdings and CompoSecure 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.