Correlation Between Genpact and CDW Corp

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

Diversification Opportunities for Genpact and CDW Corp

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Genpact and CDW Corp is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Genpact and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Genpact 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 Genpact 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 Genpact i.e., Genpact and CDW Corp go up and down completely randomly.

Pair Corralation between Genpact and CDW Corp

Taking into account the 90-day investment horizon Genpact is expected to generate 2.55 times less return on investment than CDW Corp. But when comparing it to its historical volatility, Genpact is 1.13 times less risky than CDW Corp. It trades about 0.03 of its potential returns per unit of risk. CDW Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,022  in CDW Corp on May 16, 2022 and sell it today you would earn a total of  7,005  from holding CDW Corp or generate 63.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Genpact  vs.  CDW Corp

 Performance (%) 
       Timeline  
Genpact 
Genpact Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Genpact are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, Genpact exhibited solid returns over the last few months and may actually be approaching a breakup point.

Genpact Price Channel

CDW Corp 
CDW Corp Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CDW Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, CDW Corp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

CDW Corp Price Channel

Genpact and CDW Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genpact and CDW Corp

The main advantage of trading using opposite Genpact and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact 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 Genpact 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.
Check out your portfolio center. 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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