Correlation Between ExlService Holdings and Appen

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

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

Diversification Opportunities for ExlService Holdings and Appen

0.52

Correlation Coefficient

ExlService Holdings  Appen

Very weak diversification

The 3 months correlation between ExlService and Appen is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and Appen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appen Limited and ExlService 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 ExlService Holdings are associated (or correlated) with Appen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appen Limited has no effect on the direction of ExlService Holdings i.e., ExlService Holdings and Appen go up and down completely randomly.

Pair Corralation between ExlService Holdings and Appen

Given the investment horizon of 90 days ExlService Holdings is expected to generate 1.26 times less return on investment than Appen. But when comparing it to its historical volatility, ExlService Holdings is 6.07 times less risky than Appen. It trades about 0.06 of its potential returns per unit of risk. Appen Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  69.00  in Appen Limited on November 29, 2024 and sell it today you would lose (11.00) from holding Appen Limited or give up 15.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

ExlService Holdings  vs.  Appen Limited

ExlService Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, ExlService Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Appen Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Appen may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ExlService Holdings and Appen

The main advantage of trading using opposite ExlService Holdings and Appen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ExlService Holdings position performs unexpectedly, Appen 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 Appen will offset losses from the drop in Appen's long position.

The idea behind ExlService Holdings and Appen 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.