Correlation Between Evertec and Zapata Computing

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

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

Diversification Opportunities for Evertec and Zapata Computing

-0.69

Correlation Coefficient

Evertec  Zapata Computing

Excellent diversification

The 3 months correlation between Evertec and Zapata is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Zapata Computing Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapata Computing Holdings 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 Zapata Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapata Computing Holdings has no effect on the direction of Evertec i.e., Evertec and Zapata Computing go up and down completely randomly.

Pair Corralation between Evertec and Zapata Computing

Given the investment horizon of 90 days Evertec is expected to generate 87.77 times less return on investment than Zapata Computing. But when comparing it to its historical volatility, Evertec is 55.99 times less risky than Zapata Computing. It trades about 0.07 of its potential returns per unit of risk. Zapata Computing Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4.20  in Zapata Computing Holdings on September 3, 2024 and sell it today you would lose (3.64) from holding Zapata Computing Holdings or give up 86.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	64.06%
Values	Daily Returns

Evertec  vs.  Zapata Computing Holdings

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.

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Zapata Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Zapata Computing

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

The idea behind Evertec and Zapata Computing Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.