Correlation Between Evertec and Microsoft
Can any of the company-specific risk be diversified away by investing in both Evertec and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evertec and Microsoft, you can compare the effects of market volatilities on Evertec and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evertec and Microsoft.
Diversification Opportunities for Evertec and Microsoft
Very good diversification
The 3 months correlation between Evertec and Microsoft is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Evertec i.e., Evertec and Microsoft go up and down completely randomly.
Pair Corralation between Evertec and Microsoft
Given the investment horizon of 90 days Evertec is expected to under-perform the Microsoft. In addition to that, Evertec is 2.07 times more volatile than Microsoft. It trades about -0.05 of its total potential returns per unit of risk. Microsoft is currently generating about 0.12 per unit of volatility. If you would invest 40,748 in Microsoft on December 29, 2023 and sell it today you would earn a total of 1,395 from holding Microsoft or generate 3.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Evertec vs. Microsoft
Performance |
Timeline |
Evertec |
Microsoft |
Evertec and Microsoft Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Evertec and Microsoft
The main advantage of trading using opposite Evertec and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evertec position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.The idea behind Evertec and Microsoft 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.Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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