Correlation Between ESGL Holdings and Genpact

Can any of the company-specific risk be diversified away by investing in both ESGL Holdings 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 ESGL Holdings and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESGL Holdings Limited and Genpact Limited, you can compare the effects of market volatilities on ESGL Holdings 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 ESGL Holdings with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESGL Holdings and Genpact.

Diversification Opportunities for ESGL Holdings and Genpact

0.75

Correlation Coefficient

ESGL Holdings  Genpact

Poor diversification

The 3 months correlation between ESGL and Genpact is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and ESGL Holdings 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 ESGL Holdings Limited 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 ESGL Holdings i.e., ESGL Holdings and Genpact go up and down completely randomly.

Pair Corralation between ESGL Holdings and Genpact

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 137.28 times more return on investment than Genpact. However, ESGL Holdings is 137.28 times more volatile than Genpact Limited. It trades about 0.22 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.0 per unit of risk. If you would invest  12,788  in ESGL Holdings Limited on September 23, 2024 and sell it today you would lose (12,786) from holding ESGL Holdings Limited or give up 99.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.31%
Values	Daily Returns

ESGL Holdings Limited  vs.  Genpact Limited

ESGL Holdings Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Genpact Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Genpact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ESGL Holdings and Genpact

The main advantage of trading using opposite ESGL Holdings and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESGL Holdings 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 ESGL Holdings Limited 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.