Correlation Between Genpact and International Business

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

Diversification Opportunities for Genpact and International Business

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Genpact and International is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Genpact and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Genpact i.e., Genpact and International Business go up and down completely randomly.

Pair Corralation between Genpact and International Business

Taking into account the 90-day investment horizon Genpact is expected to generate 1.08 times more return on investment than International Business. However, Genpact is 1.08 times more volatile than International Business Machines. It trades about 0.13 of its potential returns per unit of risk. International Business Machines is currently generating about 0.01 per unit of risk. If you would invest  4,223  in Genpact on May 12, 2022 and sell it today you would earn a total of  557.00  from holding Genpact or generate 13.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Genpact  vs.  International Business Machine

 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

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

International Price Channel

Genpact and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genpact and International Business

The main advantage of trading using opposite Genpact and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
The idea behind Genpact and International Business Machines 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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