Correlation Between Evertec and Taoping

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

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

Diversification Opportunities for Evertec and Taoping

0.43

Correlation Coefficient

Evertec  Taoping

Very weak diversification

The 3 months correlation between Evertec and Taoping is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Taoping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taoping 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 Taoping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taoping has no effect on the direction of Evertec i.e., Evertec and Taoping go up and down completely randomly.

Pair Corralation between Evertec and Taoping

Given the investment horizon of 90 days Evertec is expected to under-perform the Taoping. But the stock apears to be less risky and, when comparing its historical volatility, Evertec is 4.76 times less risky than Taoping. The stock trades about -0.11 of its potential returns per unit of risk. The Taoping is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Taoping on November 27, 2024 and sell it today you would lose (1.51) from holding Taoping or give up 4.58% of portfolio value over 90 days.

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

Evertec  vs.  Taoping

Evertec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Taoping

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taoping are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Taoping is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Evertec and Taoping

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

The idea behind Evertec and Taoping 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.