Correlation Between DXC Technology and EPAM Systems

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Can any of the company-specific risk be diversified away by investing in both DXC Technology 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 DXC Technology and EPAM Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXC Technology Co and EPAM Systems, you can compare the effects of market volatilities on DXC Technology 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 DXC Technology with a short position of EPAM Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and EPAM Systems.

Diversification Opportunities for DXC Technology and EPAM Systems

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between DXC and EPAM is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and DXC Technology 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 DXC Technology Co 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 DXC Technology i.e., DXC Technology and EPAM Systems go up and down completely randomly.

Pair Corralation between DXC Technology and EPAM Systems

Considering the 90-day investment horizon DXC Technology Co is expected to under-perform the EPAM Systems. In addition to that, DXC Technology is 1.0 times more volatile than EPAM Systems. It trades about -0.03 of its total potential returns per unit of risk. EPAM Systems is currently generating about 0.0 per unit of volatility. If you would invest  34,167  in EPAM Systems on December 29, 2023 and sell it today you would lose (6,530) from holding EPAM Systems or give up 19.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DXC Technology Co  vs.  EPAM Systems

 Performance 
       Timeline  
DXC Technology 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
EPAM Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 very healthy basic indicators, EPAM Systems is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

DXC Technology and EPAM Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DXC Technology and EPAM Systems

The main advantage of trading using opposite DXC Technology and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology 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 DXC Technology Co 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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