Correlation Between Evertec and Axos Financial

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

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

Diversification Opportunities for Evertec and Axos Financial

0.83

Correlation Coefficient

Evertec  Axos Financial

Very poor diversification

The 3 months correlation between Evertec and Axos is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial 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 Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of Evertec i.e., Evertec and Axos Financial go up and down completely randomly.

Pair Corralation between Evertec and Axos Financial

Given the investment horizon of 90 days Evertec is expected to generate 5.44 times less return on investment than Axos Financial. But when comparing it to its historical volatility, Evertec is 1.6 times less risky than Axos Financial. It trades about 0.04 of its potential returns per unit of risk. Axos Financial is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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

Evertec  vs.  Axos Financial

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.

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.

Pair Trading with Evertec and Axos Financial

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

The idea behind Evertec and Axos Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.