Correlation Between NAPCO Security and Evolv Technologies

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

By analyzing existing cross correlation between NAPCO Security Technologies and Evolv Technologies Holdings, you can compare the effects of market volatilities on NAPCO Security and Evolv Technologies 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 NAPCO Security with a short position of Evolv Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAPCO Security and Evolv Technologies.

Diversification Opportunities for NAPCO Security and Evolv Technologies

0.6

Correlation Coefficient

NAPCO Security  Evolv Technologies

Poor diversification

The 3 months correlation between NAPCO and Evolv is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Evolv Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolv Technologies and NAPCO Security 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 NAPCO Security Technologies are associated (or correlated) with Evolv Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolv Technologies has no effect on the direction of NAPCO Security i.e., NAPCO Security and Evolv Technologies go up and down completely randomly.

Pair Corralation between NAPCO Security and Evolv Technologies

Given the investment horizon of 90 days NAPCO Security is expected to generate 6.5 times less return on investment than Evolv Technologies. But when comparing it to its historical volatility, NAPCO Security Technologies is 2.91 times less risky than Evolv Technologies. It trades about 0.03 of its potential returns per unit of risk. Evolv Technologies Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Evolv Technologies Holdings on September 12, 2024 and sell it today you would earn a total of  49.00  from holding Evolv Technologies Holdings or generate 12.44% return on investment over 90 days.

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

NAPCO Security Technologies  vs.  Evolv Technologies Holdings

NAPCO Security Techn

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAPCO Security Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, NAPCO Security is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Evolv Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evolv Technologies Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Evolv Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAPCO Security and Evolv Technologies

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

The idea behind NAPCO Security Technologies and Evolv Technologies 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.