Correlation Between Evertec and Trend Micro

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

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

Diversification Opportunities for Evertec and Trend Micro

0.11

Correlation Coefficient

Evertec  Trend Micro

Average diversification

The 3 months correlation between Evertec and Trend is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Trend Micro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend Micro ADR 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 Trend Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend Micro ADR has no effect on the direction of Evertec i.e., Evertec and Trend Micro go up and down completely randomly.

Pair Corralation between Evertec and Trend Micro

Given the investment horizon of 90 days Evertec is expected to generate 1.22 times less return on investment than Trend Micro. But when comparing it to its historical volatility, Evertec is 1.17 times less risky than Trend Micro. It trades about 0.08 of its potential returns per unit of risk. Trend Micro ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,980  in Trend Micro ADR on December 5, 2024 and sell it today you would earn a total of  1,438  from holding Trend Micro ADR or generate 24.05% return on investment over 90 days.

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

Evertec  vs.  Trend Micro ADR

Evertec

Risk-Adjusted Performance

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

Trend Micro ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trend Micro ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Trend Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Trend Micro

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

The idea behind Evertec and Trend Micro ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.