Correlation Between Globant SA and EPAM Systems

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

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

Diversification Opportunities for Globant SA and EPAM Systems

0.93

Correlation Coefficient

Globant SA  EPAM Systems

Almost no diversification

The 3 months correlation between Globant and EPAM is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Globant SA and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and Globant SA 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 Globant SA are associated (or correlated) with EPAM Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPAM Systems has no effect on the direction of Globant SA i.e., Globant SA and EPAM Systems go up and down completely randomly.

Pair Corralation between Globant SA and EPAM Systems

Given the investment horizon of 90 days Globant SA is expected to under-perform the EPAM Systems. In addition to that, Globant SA is 1.62 times more volatile than EPAM Systems. It trades about -0.21 of its total potential returns per unit of risk. EPAM Systems is currently generating about -0.2 per unit of volatility. If you would invest  23,468  in EPAM Systems on December 28, 2024 and sell it today you would lose (6,694) from holding EPAM Systems or give up 28.52% of portfolio value over 90 days.

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

Globant SA  vs.  EPAM Systems

Globant SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globant SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EPAM Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days EPAM Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Globant SA and EPAM Systems

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

The idea behind Globant SA and EPAM Systems 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.