Correlation Between Evertec and Priority Technology

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

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

Diversification Opportunities for Evertec and Priority Technology

0.85

Correlation Coefficient

Evertec  Priority Technology

Very poor diversification

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

Pair Corralation between Evertec and Priority Technology

Given the investment horizon of 90 days Evertec is expected to generate 7.06 times less return on investment than Priority Technology. But when comparing it to its historical volatility, Evertec is 3.35 times less risky than Priority Technology. It trades about 0.07 of its potential returns per unit of risk. Priority Technology Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  587.00  in Priority Technology Holdings on September 1, 2024 and sell it today you would earn a total of  343.00  from holding Priority Technology Holdings or generate 58.43% return on investment over 90 days.

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

Evertec  vs.  Priority Technology 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 December 2024.

Priority Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Priority Technology Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Priority Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Priority Technology

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

The idea behind Evertec and Priority Technology 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.