Correlation Between EPAM Systems and Information Services

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

By analyzing existing cross correlation between EPAM Systems and Information Services Group, you can compare the effects of market volatilities on EPAM Systems and Information Services 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 EPAM Systems with a short position of Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPAM Systems and Information Services.

Diversification Opportunities for EPAM Systems and Information Services

0.75

Correlation Coefficient

EPAM Systems  Information Services

Poor diversification

The 3 months correlation between EPAM and Information is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Information Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and EPAM Systems 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 EPAM Systems are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of EPAM Systems i.e., EPAM Systems and Information Services go up and down completely randomly.

Pair Corralation between EPAM Systems and Information Services

Given the investment horizon of 90 days EPAM Systems is expected to generate 0.98 times more return on investment than Information Services. However, EPAM Systems is 1.02 times less risky than Information Services. It trades about -0.43 of its potential returns per unit of risk. Information Services Group is currently generating about -0.63 per unit of risk. If you would invest  27,143  in EPAM Systems on February 2, 2024 and sell it today you would lose (3,441) from holding EPAM Systems or give up 12.68% of portfolio value over 90 days.

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

EPAM Systems  vs.  Information Services Group

EPAM Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPAM Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with EPAM Systems and Information Services

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

The idea behind EPAM Systems and Information Services Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.