Correlation Between International Business and Genpact
Can any of the company-specific risk be diversified away by investing in both International Business and Genpact 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 International Business and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Genpact Limited, you can compare the effects of market volatilities on International Business and Genpact 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 International Business with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Genpact.
Diversification Opportunities for International Business and Genpact
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Genpact is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and International Business 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 International Business Machines are associated (or correlated) with Genpact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genpact Limited has no effect on the direction of International Business i.e., International Business and Genpact go up and down completely randomly.
Pair Corralation between International Business and Genpact
Considering the 90-day investment horizon International Business Machines is expected to under-perform the Genpact. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.29 times less risky than Genpact. The stock trades about -0.15 of its potential returns per unit of risk. The Genpact Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 3,220 in Genpact Limited on January 25, 2024 and sell it today you would lose (50.00) from holding Genpact Limited or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Genpact Limited
Performance |
| Timeline |
| International Business |
| Genpact Limited |
International Business and Genpact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Genpact
The main advantage of trading using opposite International Business and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Genpact 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 Genpact will offset losses from the drop in Genpact's long position.The idea behind International Business Machines and Genpact Limited 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 the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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