Correlation Between Genpact and Clearwater Paper

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

Diversification Opportunities for Genpact and Clearwater Paper

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Genpact and Clearwater is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Clearwater Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper 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 Limited are associated (or correlated) with Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper has no effect on the direction of Genpact i.e., Genpact and Clearwater Paper go up and down completely randomly.

Pair Corralation between Genpact and Clearwater Paper

Taking into account the 90-day investment horizon Genpact Limited is expected to under-perform the Clearwater Paper. But the stock apears to be less risky and, when comparing its historical volatility, Genpact Limited is 1.51 times less risky than Clearwater Paper. The stock trades about -0.01 of its potential returns per unit of risk. The Clearwater Paper is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,693  in Clearwater Paper on September 4, 2022 and sell it today you would earn a total of  232.00  from holding Clearwater Paper or generate 6.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Genpact Limited  vs.  Clearwater Paper

 Performance (%) 
       Timeline  
Genpact Limited 
Genpact Performance
0 of 100
Over the last 90 days Genpact Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Genpact is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Genpact Price Channel

Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clearwater Price Channel

Genpact and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genpact and Clearwater Paper

The main advantage of trading using opposite Genpact and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, Clearwater Paper 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.
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The idea behind Genpact Limited and Clearwater Paper 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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