Correlation Between Evertec and Confluent

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

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

Diversification Opportunities for Evertec and Confluent

0.79

Correlation Coefficient

Evertec  Confluent

Poor diversification

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

Pair Corralation between Evertec and Confluent

Given the investment horizon of 90 days Evertec is expected to generate 4.66 times less return on investment than Confluent. But when comparing it to its historical volatility, Evertec is 2.57 times less risky than Confluent. It trades about 0.02 of its potential returns per unit of risk. Confluent is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,200  in Confluent on September 19, 2024 and sell it today you would earn a total of  746.00  from holding Confluent or generate 33.91% return on investment over 90 days.

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

Evertec  vs.  Confluent

Evertec

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Evertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Evertec is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Confluent

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Confluent

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

The idea behind Evertec and Confluent 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.