Correlation Between Adobe Systems and Evertec

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

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

Diversification Opportunities for Adobe Systems and Evertec

0.38

Correlation Coefficient

Adobe Systems  Evertec

Weak diversification

The 3 months correlation between Adobe and Evertec is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and Adobe Systems 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 Adobe Systems Incorporated are associated (or correlated) with Evertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evertec has no effect on the direction of Adobe Systems i.e., Adobe Systems and Evertec go up and down completely randomly.

Pair Corralation between Adobe Systems and Evertec

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to under-perform the Evertec. In addition to that, Adobe Systems is 1.6 times more volatile than Evertec. It trades about -0.05 of its total potential returns per unit of risk. Evertec is currently generating about 0.05 per unit of volatility. If you would invest  3,373  in Evertec on September 17, 2024 and sell it today you would earn a total of  141.00  from holding Evertec or generate 4.18% return on investment over 90 days.

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

Adobe Systems Incorporated  vs.  Evertec

Adobe Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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

Evertec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Evertec is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adobe Systems and Evertec

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

The idea behind Adobe Systems Incorporated and Evertec 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.