Correlation Between EPAM Systems and Genpact

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

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

Diversification Opportunities for EPAM Systems and Genpact

0.94

Correlation Coefficient

EPAM Systems  Genpact

Almost no diversification

The 3 months correlation between EPAM and Genpact is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited 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 Genpact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genpact Limited has no effect on the direction of EPAM Systems i.e., EPAM Systems and Genpact go up and down completely randomly.

Pair Corralation between EPAM Systems and Genpact

Given the investment horizon of 90 days EPAM Systems is expected to generate 1.53 times more return on investment than Genpact. However, EPAM Systems is 1.53 times more volatile than Genpact Limited. It trades about 0.19 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.15 per unit of risk. If you would invest  19,129  in EPAM Systems on September 27, 2024 and sell it today you would earn a total of  4,989  from holding EPAM Systems or generate 26.08% return on investment over 90 days.

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

EPAM Systems  vs.  Genpact Limited

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.

Genpact Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Genpact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EPAM Systems and Genpact

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

The idea behind EPAM Systems and Genpact Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.