Correlation Between Kyndryl Holdings and EPAM Systems

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

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

Diversification Opportunities for Kyndryl Holdings and EPAM Systems

0.68

Correlation Coefficient

Kyndryl Holdings  EPAM Systems

Poor diversification

The 3 months correlation between Kyndryl and EPAM is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kyndryl Holdings and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and Kyndryl Holdings 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 Kyndryl Holdings 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 Kyndryl Holdings i.e., Kyndryl Holdings and EPAM Systems go up and down completely randomly.

Pair Corralation between Kyndryl Holdings and EPAM Systems

Allowing for the 90-day total investment horizon Kyndryl Holdings is expected to generate 1.39 times more return on investment than EPAM Systems. However, Kyndryl Holdings is 1.39 times more volatile than EPAM Systems. It trades about -0.25 of its potential returns per unit of risk. EPAM Systems is currently generating about -0.48 per unit of risk. If you would invest  2,155  in Kyndryl Holdings on January 29, 2024 and sell it today you would lose (206.00) from holding Kyndryl Holdings or give up 9.56% of portfolio value over 90 days.

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

Kyndryl Holdings  vs.  EPAM Systems

Kyndryl Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyndryl Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental 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

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 Kyndryl Holdings and EPAM Systems

The main advantage of trading using opposite Kyndryl Holdings and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyndryl Holdings 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 Kyndryl Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.