Correlation Between EPAM Systems and Digimarc

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

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

Diversification Opportunities for EPAM Systems and Digimarc

0.62

Correlation Coefficient

EPAM Systems  Digimarc

Poor diversification

The 3 months correlation between EPAM and Digimarc is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc 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 Digimarc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digimarc has no effect on the direction of EPAM Systems i.e., EPAM Systems and Digimarc go up and down completely randomly.

Pair Corralation between EPAM Systems and Digimarc

Given the investment horizon of 90 days EPAM Systems is expected to generate 1.12 times less return on investment than Digimarc. But when comparing it to its historical volatility, EPAM Systems is 1.24 times less risky than Digimarc. It trades about 0.14 of its potential returns per unit of risk. Digimarc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,872  in Digimarc on September 12, 2024 and sell it today you would earn a total of  737.00  from holding Digimarc or generate 25.66% return on investment over 90 days.

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

EPAM Systems  vs.  Digimarc

EPAM Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EPAM Systems are ranked lower than 11 (%) 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.

Digimarc

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with EPAM Systems and Digimarc

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

The idea behind EPAM Systems and Digimarc 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.