Correlation Between Evertec and Gen Digital

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

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

Diversification Opportunities for Evertec and Gen Digital

0.85

Correlation Coefficient

Evertec  Gen Digital

Very poor diversification

The 3 months correlation between Evertec and Gen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Gen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen Digital 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 Gen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen Digital has no effect on the direction of Evertec i.e., Evertec and Gen Digital go up and down completely randomly.

Pair Corralation between Evertec and Gen Digital

Given the investment horizon of 90 days Evertec is expected to under-perform the Gen Digital. But the stock apears to be less risky and, when comparing its historical volatility, Evertec is 1.05 times less risky than Gen Digital. The stock trades about -0.03 of its potential returns per unit of risk. The Gen Digital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,276  in Gen Digital on September 20, 2024 and sell it today you would earn a total of  487.50  from holding Gen Digital or generate 21.42% return on investment over 90 days.

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

Evertec  vs.  Gen Digital

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 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.

Gen Digital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Gen Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evertec and Gen Digital

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

The idea behind Evertec and Gen Digital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.