Correlation Between Deveron Corp and EPAM Systems

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

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

Diversification Opportunities for Deveron Corp and EPAM Systems

0.24

Correlation Coefficient

Deveron Corp  EPAM Systems

Modest diversification

The 3 months correlation between Deveron and EPAM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Deveron Corp and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and Deveron Corp 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 Deveron Corp 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 Deveron Corp i.e., Deveron Corp and EPAM Systems go up and down completely randomly.

Pair Corralation between Deveron Corp and EPAM Systems

Assuming the 90 days horizon Deveron Corp is expected to under-perform the EPAM Systems. In addition to that, Deveron Corp is 2.04 times more volatile than EPAM Systems. It trades about -0.06 of its total potential returns per unit of risk. EPAM Systems is currently generating about -0.01 per unit of volatility. If you would invest  27,627  in EPAM Systems on December 4, 2024 and sell it today you would lose (7,826) from holding EPAM Systems or give up 28.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Deveron Corp  vs.  EPAM Systems

Deveron Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deveron Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Deveron Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

EPAM Systems

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Deveron Corp and EPAM Systems

The main advantage of trading using opposite Deveron Corp and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deveron Corp 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 Deveron Corp 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.

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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 Correlations module to find global opportunities by holding instruments from different markets.