Correlation Between ExlService Holdings and CGI

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

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

Diversification Opportunities for ExlService Holdings and CGI

-0.49

Correlation Coefficient

ExlService Holdings  CGI

Very good diversification

The 3 months correlation between ExlService and CGI is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of ExlService Holdings i.e., ExlService Holdings and CGI go up and down completely randomly.

Pair Corralation between ExlService Holdings and CGI

Given the investment horizon of 90 days ExlService Holdings is expected to generate 1.34 times more return on investment than CGI. However, ExlService Holdings is 1.34 times more volatile than CGI Inc. It trades about 0.29 of its potential returns per unit of risk. CGI Inc is currently generating about 0.01 per unit of risk. If you would invest  3,592  in ExlService Holdings on August 31, 2024 and sell it today you would earn a total of  1,067  from holding ExlService Holdings or generate 29.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ExlService Holdings  vs.  CGI Inc

ExlService Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, ExlService Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

CGI Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGI Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, CGI is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ExlService Holdings and CGI

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

The idea behind ExlService Holdings and CGI 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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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.