Correlation Between Gartner and EPAM Systems

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

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

Diversification Opportunities for Gartner and EPAM Systems

0.85

Correlation Coefficient

Gartner  EPAM Systems

Very poor diversification

The 3 months correlation between Gartner and EPAM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gartner and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and Gartner 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 Gartner 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 Gartner i.e., Gartner and EPAM Systems go up and down completely randomly.

Pair Corralation between Gartner and EPAM Systems

Allowing for the 90-day total investment horizon Gartner is expected to generate 0.62 times more return on investment than EPAM Systems. However, Gartner is 1.62 times less risky than EPAM Systems. It trades about -0.13 of its potential returns per unit of risk. EPAM Systems is currently generating about -0.18 per unit of risk. If you would invest  48,696  in Gartner on December 27, 2024 and sell it today you would lose (6,019) from holding Gartner or give up 12.36% of portfolio value over 90 days.

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

Gartner  vs.  EPAM Systems

Gartner

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gartner 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 Gartner and EPAM Systems

The main advantage of trading using opposite Gartner and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gartner 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 Gartner 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.