Correlation Between EPAM Systems and Home Bancorp

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

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

Diversification Opportunities for EPAM Systems and Home Bancorp

-0.21

Correlation Coefficient

EPAM Systems  Home Bancorp

Very good diversification

The 3 months correlation between EPAM and Home is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of EPAM Systems i.e., EPAM Systems and Home Bancorp go up and down completely randomly.

Pair Corralation between EPAM Systems and Home Bancorp

Given the investment horizon of 90 days EPAM Systems is expected to under-perform the Home Bancorp. In addition to that, EPAM Systems is 2.64 times more volatile than Home Bancorp. It trades about -0.18 of its total potential returns per unit of risk. Home Bancorp is currently generating about 0.22 per unit of volatility. If you would invest  3,392  in Home Bancorp on February 16, 2024 and sell it today you would earn a total of  390.00  from holding Home Bancorp or generate 11.5% return on investment over 90 days.

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

EPAM Systems  vs.  Home Bancorp

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

Home Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Home Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with EPAM Systems and Home Bancorp

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

The idea behind EPAM Systems and Home Bancorp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.