Correlation Between VNET Group and EPAM Systems

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

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

Diversification Opportunities for VNET Group and EPAM Systems

0.16

Correlation Coefficient

VNET Group  EPAM Systems

Average diversification

The 3 months correlation between VNET and EPAM is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding VNET Group DRC and EPAM Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPAM Systems and VNET Group 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 VNET Group DRC 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 VNET Group i.e., VNET Group and EPAM Systems go up and down completely randomly.

Pair Corralation between VNET Group and EPAM Systems

Given the investment horizon of 90 days VNET Group DRC is expected to generate 2.45 times more return on investment than EPAM Systems. However, VNET Group is 2.45 times more volatile than EPAM Systems. It trades about 0.12 of its potential returns per unit of risk. EPAM Systems is currently generating about 0.15 per unit of risk. If you would invest  271.00  in VNET Group DRC on September 2, 2024 and sell it today you would earn a total of  117.00  from holding VNET Group DRC or generate 43.17% return on investment over 90 days.

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

VNET Group DRC  vs.  EPAM Systems

VNET Group DRC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VNET Group DRC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, VNET Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

EPAM Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EPAM Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, EPAM Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VNET Group and EPAM Systems

The main advantage of trading using opposite VNET Group and EPAM Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VNET Group 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 VNET Group DRC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.