Correlation Between Evertec and Radware

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

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

Diversification Opportunities for Evertec and Radware

0.36

Correlation Coefficient

Evertec  Radware

Weak diversification

The 3 months correlation between Evertec and Radware is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Radware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radware 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 Radware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radware has no effect on the direction of Evertec i.e., Evertec and Radware go up and down completely randomly.

Pair Corralation between Evertec and Radware

Given the investment horizon of 90 days Evertec is expected to generate 2.05 times less return on investment than Radware. But when comparing it to its historical volatility, Evertec is 1.23 times less risky than Radware. It trades about 0.05 of its potential returns per unit of risk. Radware is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,180  in Radware on August 30, 2024 and sell it today you would earn a total of  233.00  from holding Radware or generate 10.69% return on investment over 90 days.

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

Evertec  vs.  Radware

Evertec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 4 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Radware

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radware are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Radware may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Evertec and Radware

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

The idea behind Evertec and Radware 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.