Correlation Between Genpact and Ecolab

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

Diversification Opportunities for Genpact and Ecolab

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Genpact and Ecolab is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Genpact i.e., Genpact and Ecolab go up and down completely randomly.

Pair Corralation between Genpact and Ecolab

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.66 times more return on investment than Ecolab. However, Genpact Limited is 1.51 times less risky than Ecolab. It trades about 0.02 of its potential returns per unit of risk. Ecolab Inc is currently generating about -0.03 per unit of risk. If you would invest  4,469  in Genpact Limited on September 4, 2022 and sell it today you would earn a total of  126.00  from holding Genpact Limited or generate 2.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.21%
ValuesDaily Returns

Genpact Limited  vs.  Ecolab Inc

 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

Ecolab Inc 
Ecolab Performance
0 of 100
Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Genpact and Ecolab Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genpact and Ecolab

The main advantage of trading using opposite Genpact and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.
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The idea behind Genpact Limited and Ecolab Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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