Correlation Between Evertec and Pagaya Technologies

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

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

Diversification Opportunities for Evertec and Pagaya Technologies

0.06

Correlation Coefficient

Evertec  Pagaya Technologies

Significant diversification

The 3 months correlation between Evertec and Pagaya is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Pagaya Technologies Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pagaya Technologies 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 Pagaya Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pagaya Technologies has no effect on the direction of Evertec i.e., Evertec and Pagaya Technologies go up and down completely randomly.

Pair Corralation between Evertec and Pagaya Technologies

Given the investment horizon of 90 days Evertec is expected to generate 0.11 times more return on investment than Pagaya Technologies. However, Evertec is 9.4 times less risky than Pagaya Technologies. It trades about 0.01 of its potential returns per unit of risk. Pagaya Technologies Ltd is currently generating about -0.04 per unit of risk. If you would invest  3,351  in Evertec on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Evertec or generate 0.3% return on investment over 90 days.

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

Evertec  vs.  Pagaya Technologies Ltd

Evertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evertec has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pagaya Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pagaya Technologies Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Evertec and Pagaya Technologies

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

The idea behind Evertec and Pagaya Technologies Ltd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.