Correlation Between Evertec and Bakkt Holdings

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

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

Diversification Opportunities for Evertec and Bakkt Holdings

0.68

Correlation Coefficient

Evertec  Bakkt Holdings

Poor diversification

The 3 months correlation between Evertec and Bakkt is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Bakkt Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakkt Holdings 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 Bakkt Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakkt Holdings has no effect on the direction of Evertec i.e., Evertec and Bakkt Holdings go up and down completely randomly.

Pair Corralation between Evertec and Bakkt Holdings

Given the investment horizon of 90 days Evertec is expected to generate 19.45 times less return on investment than Bakkt Holdings. But when comparing it to its historical volatility, Evertec is 12.79 times less risky than Bakkt Holdings. It trades about 0.07 of its potential returns per unit of risk. Bakkt Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,304  in Bakkt Holdings on September 2, 2024 and sell it today you would earn a total of  1,481  from holding Bakkt Holdings or generate 113.57% return on investment over 90 days.

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

Evertec  vs.  Bakkt Holdings

Evertec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Evertec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bakkt Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bakkt Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Bakkt Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Bakkt Holdings

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

The idea behind Evertec and Bakkt Holdings 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.