Correlation Between Evertec and Arqit Quantum

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

By analyzing existing cross correlation between Evertec and Arqit Quantum, you can compare the effects of market volatilities on Evertec and Arqit Quantum 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 Arqit Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evertec and Arqit Quantum.

Diversification Opportunities for Evertec and Arqit Quantum

0.71

Correlation Coefficient

Evertec  Arqit Quantum

Poor diversification

The 3 months correlation between Evertec and Arqit is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Arqit Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arqit Quantum 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 Arqit Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arqit Quantum has no effect on the direction of Evertec i.e., Evertec and Arqit Quantum go up and down completely randomly.

Pair Corralation between Evertec and Arqit Quantum

Given the investment horizon of 90 days Evertec is expected to generate 39.5 times less return on investment than Arqit Quantum. But when comparing it to its historical volatility, Evertec is 9.02 times less risky than Arqit Quantum. It trades about 0.05 of its potential returns per unit of risk. Arqit Quantum is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Arqit Quantum on September 15, 2024 and sell it today you would earn a total of  1,655  from holding Arqit Quantum or generate 231.47% return on investment over 90 days.

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

Evertec  vs.  Arqit Quantum

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arqit Quantum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arqit Quantum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arqit Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Arqit Quantum

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

The idea behind Evertec and Arqit Quantum 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.