Correlation Between Axos Financial and Evertec

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

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

Diversification Opportunities for Axos Financial and Evertec

0.83

Correlation Coefficient

Axos Financial  Evertec

Very poor diversification

The 3 months correlation between Axos and Evertec is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and Axos Financial 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 Axos Financial 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 Axos Financial i.e., Axos Financial and Evertec go up and down completely randomly.

Pair Corralation between Axos Financial and Evertec

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 1.6 times more return on investment than Evertec. However, Axos Financial is 1.6 times more volatile than Evertec. It trades about 0.14 of its potential returns per unit of risk. Evertec is currently generating about 0.04 per unit of risk. If you would invest  5,167  in Axos Financial on September 3, 2024 and sell it today you would earn a total of  3,118  from holding Axos Financial or generate 60.34% return on investment over 90 days.

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

Axos Financial  vs.  Evertec

Axos Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Axos Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Evertec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 5 (%) 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 January 2025.

Pair Trading with Axos Financial and Evertec

The main advantage of trading using opposite Axos Financial and Evertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axos Financial 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 Axos Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.