Correlation Between EPAM Systems and CDW Corp

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

Diversification Opportunities for EPAM Systems and CDW Corp

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between EPAM and CDW is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding EPAM Systems and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp 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 CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of EPAM Systems i.e., EPAM Systems and CDW Corp go up and down completely randomly.

Pair Corralation between EPAM Systems and CDW Corp

Given the investment horizon of 90 days EPAM Systems is expected to under-perform the CDW Corp. In addition to that, EPAM Systems is 2.23 times more volatile than CDW Corp. It trades about -0.27 of its total potential returns per unit of risk. CDW Corp is currently generating about 0.27 per unit of volatility. If you would invest  24,491  in CDW Corp on December 30, 2023 and sell it today you would earn a total of  1,087  from holding CDW Corp or generate 4.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

EPAM Systems  vs.  CDW Corp

 Performance 
       Timeline  
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.
CDW Corp 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CDW Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, CDW Corp showed solid returns over the last few months and may actually be approaching a breakup point.

EPAM Systems and CDW Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EPAM Systems and CDW Corp

The main advantage of trading using opposite EPAM Systems and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPAM Systems position performs unexpectedly, CDW Corp 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 CDW Corp will offset losses from the drop in CDW Corp's long position.
The idea behind EPAM Systems and CDW Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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