Correlation Between Evertec and MSP Recovery

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

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

Diversification Opportunities for Evertec and MSP Recovery

-0.33

Correlation Coefficient

Evertec  MSP Recovery

Very good diversification

The 3 months correlation between Evertec and MSP is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Evertec i.e., Evertec and MSP Recovery go up and down completely randomly.

Pair Corralation between Evertec and MSP Recovery

Given the investment horizon of 90 days Evertec is expected to generate 0.23 times more return on investment than MSP Recovery. However, Evertec is 4.27 times less risky than MSP Recovery. It trades about 0.08 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.01 per unit of risk. If you would invest  3,361  in Evertec on December 20, 2024 and sell it today you would earn a total of  370.00  from holding Evertec or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Evertec  vs.  MSP Recovery

Evertec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Evertec exhibited solid returns over the last few months and may actually be approaching a breakup point.

MSP Recovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MSP Recovery is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Evertec and MSP Recovery

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

The idea behind Evertec and MSP Recovery 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.