Correlation Between Evertec and Aeye

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

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

Diversification Opportunities for Evertec and Aeye

-0.3

Correlation Coefficient

Evertec  Aeye

Very good diversification

The 3 months correlation between Evertec and Aeye is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc 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 Aeye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeye Inc has no effect on the direction of Evertec i.e., Evertec and Aeye go up and down completely randomly.

Pair Corralation between Evertec and Aeye

Given the investment horizon of 90 days Evertec is expected to generate 1.59 times less return on investment than Aeye. But when comparing it to its historical volatility, Evertec is 3.42 times less risky than Aeye. It trades about 0.07 of its potential returns per unit of risk. Aeye Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  112.00  in Aeye Inc on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Aeye Inc or generate 2.68% return on investment over 90 days.

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

Evertec  vs.  Aeye Inc

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 unsteady basic indicators, Evertec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aeye Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aeye may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evertec and Aeye

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

The idea behind Evertec and Aeye Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.