Correlation Between EPAM Systems and Thoughtworks Holding

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

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

Diversification Opportunities for EPAM Systems and Thoughtworks Holding

0.8

Correlation Coefficient

EPAM Systems  Thoughtworks Holding

Very poor diversification

The 3 months correlation between EPAM and Thoughtworks is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Thoughtworks Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thoughtworks Holding 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 Thoughtworks Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thoughtworks Holding has no effect on the direction of EPAM Systems i.e., EPAM Systems and Thoughtworks Holding go up and down completely randomly.

Pair Corralation between EPAM Systems and Thoughtworks Holding

Given the investment horizon of 90 days EPAM Systems is expected to generate 2.55 times less return on investment than Thoughtworks Holding. But when comparing it to its historical volatility, EPAM Systems is 1.47 times less risky than Thoughtworks Holding. It trades about 0.1 of its potential returns per unit of risk. Thoughtworks Holding is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Thoughtworks Holding on September 27, 2024 and sell it today you would earn a total of  182.00  from holding Thoughtworks Holding or generate 68.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	76.19%
Values	Daily Returns

EPAM Systems  vs.  Thoughtworks Holding

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.

Thoughtworks Holding

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Thoughtworks Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Thoughtworks Holding is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EPAM Systems and Thoughtworks Holding

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

The idea behind EPAM Systems and Thoughtworks Holding 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.