Correlation Between Evertec and ACI Worldwide

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

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

Diversification Opportunities for Evertec and ACI Worldwide

0.87

Correlation Coefficient

Evertec  ACI Worldwide

Very poor diversification

The 3 months correlation between Evertec and ACI is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and ACI Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACI Worldwide and Evertec 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 Evertec are associated (or correlated) with ACI Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACI Worldwide has no effect on the direction of Evertec i.e., Evertec and ACI Worldwide go up and down completely randomly.

Pair Corralation between Evertec and ACI Worldwide

Given the investment horizon of 90 days Evertec is expected to generate 5.19 times less return on investment than ACI Worldwide. But when comparing it to its historical volatility, Evertec is 1.1 times less risky than ACI Worldwide. It trades about 0.04 of its potential returns per unit of risk. ACI Worldwide is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,627  in ACI Worldwide on September 15, 2024 and sell it today you would earn a total of  1,774  from holding ACI Worldwide or generate 48.91% return on investment over 90 days.

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

Evertec  vs.  ACI Worldwide

Evertec

Risk-Adjusted Performance

3 of 100

Insignificant

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 sound basic indicators, Evertec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ACI Worldwide

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ACI Worldwide are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, ACI Worldwide may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evertec and ACI Worldwide

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

The idea behind Evertec and ACI Worldwide 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.