Correlation Between EPAM Systems and Tigo Energy

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

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

Diversification Opportunities for EPAM Systems and Tigo Energy

-0.65

Correlation Coefficient

EPAM Systems  Tigo Energy

Excellent diversification

The 3 months correlation between EPAM and Tigo is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of EPAM Systems i.e., EPAM Systems and Tigo Energy go up and down completely randomly.

Pair Corralation between EPAM Systems and Tigo Energy

Given the investment horizon of 90 days EPAM Systems is expected to generate 0.38 times more return on investment than Tigo Energy. However, EPAM Systems is 2.66 times less risky than Tigo Energy. It trades about -0.01 of its potential returns per unit of risk. Tigo Energy is currently generating about -0.03 per unit of risk. If you would invest  33,611  in EPAM Systems on September 5, 2024 and sell it today you would lose (9,420) from holding EPAM Systems or give up 28.03% of portfolio value over 90 days.

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

EPAM Systems  vs.  Tigo Energy

EPAM Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPAM Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, EPAM Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tigo Energy 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with EPAM Systems and Tigo Energy

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

The idea behind EPAM Systems and Tigo Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.