Correlation Between F5 Networks and Euronet Worldwide

Can any of the company-specific risk be diversified away by investing in both F5 Networks and Euronet Worldwide 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 F5 Networks and Euronet Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between F5 Networks and Euronet Worldwide, you can compare the effects of market volatilities on F5 Networks and Euronet Worldwide 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 F5 Networks with a short position of Euronet Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of F5 Networks and Euronet Worldwide.

Diversification Opportunities for F5 Networks and Euronet Worldwide

0.45

Correlation Coefficient

F5 Networks  Euronet Worldwide

Very weak diversification

The 3 months correlation between FFIV and Euronet is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding F5 Networks and Euronet Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronet Worldwide and F5 Networks 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 F5 Networks are associated (or correlated) with Euronet Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronet Worldwide has no effect on the direction of F5 Networks i.e., F5 Networks and Euronet Worldwide go up and down completely randomly.

Pair Corralation between F5 Networks and Euronet Worldwide

Given the investment horizon of 90 days F5 Networks is expected to generate 4.48 times less return on investment than Euronet Worldwide. But when comparing it to its historical volatility, F5 Networks is 1.15 times less risky than Euronet Worldwide. It trades about 0.04 of its potential returns per unit of risk. Euronet Worldwide is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,070  in Euronet Worldwide on February 5, 2024 and sell it today you would earn a total of  2,954  from holding Euronet Worldwide or generate 36.6% return on investment over 90 days.

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

F5 Networks  vs.  Euronet Worldwide

F5 Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days F5 Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Euronet Worldwide

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Euronet Worldwide are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Euronet Worldwide may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with F5 Networks and Euronet Worldwide

The main advantage of trading using opposite F5 Networks and Euronet Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F5 Networks position performs unexpectedly, Euronet Worldwide 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 Euronet Worldwide will offset losses from the drop in Euronet Worldwide's long position.

The idea behind F5 Networks and Euronet Worldwide 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.