Correlation Between Deckers Outdoor and EPAM Systems
Can any of the company-specific risk be diversified away by investing in both Deckers Outdoor and EPAM Systems 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 Deckers Outdoor and EPAM Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deckers Outdoor and EPAM Systems, you can compare the effects of market volatilities on Deckers Outdoor and EPAM Systems 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 Deckers Outdoor with a short position of EPAM Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deckers Outdoor and EPAM Systems.
Diversification Opportunities for Deckers Outdoor and EPAM Systems
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Deckers and EPAM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and Deckers Outdoor 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 Deckers Outdoor are associated (or correlated) with EPAM Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPAM Systems has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and EPAM Systems go up and down completely randomly.
Pair Corralation between Deckers Outdoor and EPAM Systems
Given the investment horizon of 90 days Deckers Outdoor is expected to generate 1.36 times more return on investment than EPAM Systems. However, Deckers Outdoor is 1.36 times more volatile than EPAM Systems. It trades about -0.04 of its potential returns per unit of risk. EPAM Systems is currently generating about -0.35 per unit of risk. If you would invest 86,947 in Deckers Outdoor on January 27, 2024 and sell it today you would lose (3,601) from holding Deckers Outdoor or give up 4.14% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Deckers Outdoor vs. EPAM Systems
Performance |
Timeline |
Deckers Outdoor |
EPAM Systems |
Deckers Outdoor and EPAM Systems Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deckers Outdoor and EPAM Systems
The main advantage of trading using opposite Deckers Outdoor and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deckers Outdoor position performs unexpectedly, EPAM Systems 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 EPAM Systems will offset losses from the drop in EPAM Systems' long position.The idea behind Deckers Outdoor and EPAM Systems 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.EPAM Systems vs. ASGN Inc | EPAM Systems vs. CACI International | EPAM Systems vs. Science Applications International | EPAM Systems vs. CLARIVATE PLC |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Transaction History View history of all your transactions and understand their impact on performance |