Correlation Between EPAM Systems and Broadridge Financial

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

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

Diversification Opportunities for EPAM Systems and Broadridge Financial

0.45

Correlation Coefficient

EPAM Systems  Broadridge Financial

Very weak diversification

The 3 months correlation between EPAM and Broadridge is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of EPAM Systems i.e., EPAM Systems and Broadridge Financial go up and down completely randomly.

Pair Corralation between EPAM Systems and Broadridge Financial

Given the investment horizon of 90 days EPAM Systems is expected to under-perform the Broadridge Financial. In addition to that, EPAM Systems is 1.33 times more volatile than Broadridge Financial Solutions. It trades about -0.48 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about -0.21 per unit of volatility. If you would invest  20,323  in Broadridge Financial Solutions on January 29, 2024 and sell it today you would lose (908.00) from holding Broadridge Financial Solutions or give up 4.47% of portfolio value over 90 days.

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

EPAM Systems  vs.  Broadridge Financial Solutions

EPAM Systems

Risk-Adjusted Performance

0 of 100

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 May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Broadridge Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadridge Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Broadridge Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with EPAM Systems and Broadridge Financial

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

The idea behind EPAM Systems and Broadridge Financial Solutions 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.