Correlation Between EPAM Systems and Wise Plc

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

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

Diversification Opportunities for EPAM Systems and Wise Plc

0.87

Correlation Coefficient

EPAM Systems  Wise Plc

Very poor diversification

The 3 months correlation between EPAM and Wise is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of EPAM Systems i.e., EPAM Systems and Wise Plc go up and down completely randomly.

Pair Corralation between EPAM Systems and Wise Plc

Given the investment horizon of 90 days EPAM Systems is expected to generate 13.16 times less return on investment than Wise Plc. But when comparing it to its historical volatility, EPAM Systems is 1.01 times less risky than Wise Plc. It trades about 0.0 of its potential returns per unit of risk. Wise plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Wise plc on September 27, 2024 and sell it today you would earn a total of  335.00  from holding Wise plc or generate 34.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

EPAM Systems  vs.  Wise plc

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.

Wise plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EPAM Systems and Wise Plc

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

The idea behind EPAM Systems and Wise plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.