Correlation Between EPAM Systems and Aehr Test

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

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

Diversification Opportunities for EPAM Systems and Aehr Test

-0.53

Correlation Coefficient

EPAM Systems  Aehr Test

Excellent diversification

The 3 months correlation between EPAM and Aehr is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems 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 Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of EPAM Systems i.e., EPAM Systems and Aehr Test go up and down completely randomly.

Pair Corralation between EPAM Systems and Aehr Test

Given the investment horizon of 90 days EPAM Systems is expected to under-perform the Aehr Test. But the stock apears to be less risky and, when comparing its historical volatility, EPAM Systems is 1.97 times less risky than Aehr Test. The stock trades about -0.01 of its potential returns per unit of risk. The Aehr Test Systems is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,260  in Aehr Test Systems on September 4, 2024 and sell it today you would lose (990.00) from holding Aehr Test Systems or give up 43.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EPAM Systems  vs.  Aehr Test Systems

EPAM Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPAM Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, EPAM Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Aehr Test Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aehr Test Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Aehr Test is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with EPAM Systems and Aehr Test

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

The idea behind EPAM Systems and Aehr Test 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.