Correlation Between CGI and EPAM Systems

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

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

Diversification Opportunities for CGI and EPAM Systems

0.91

Correlation Coefficient

CGI  EPAM Systems

Almost no diversification

The 3 months correlation between CGI and EPAM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and CGI 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 CGI Inc 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 CGI i.e., CGI and EPAM Systems go up and down completely randomly.

Pair Corralation between CGI and EPAM Systems

Considering the 90-day investment horizon CGI Inc is expected to generate 0.47 times more return on investment than EPAM Systems. However, CGI Inc is 2.11 times less risky than EPAM Systems. It trades about 0.05 of its potential returns per unit of risk. EPAM Systems is currently generating about 0.0 per unit of risk. If you would invest  7,783  in CGI Inc on January 31, 2024 and sell it today you would earn a total of  2,431  from holding CGI Inc or generate 31.23% return on investment over 90 days.

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

CGI Inc  vs.  EPAM Systems

CGI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with CGI and EPAM Systems

The main advantage of trading using opposite CGI and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGI 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 CGI Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.