Correlation Between Genpact and Driven Brands

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

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

Diversification Opportunities for Genpact and Driven Brands

0.14

Correlation Coefficient

Genpact  Driven Brands

Average diversification

The 3 months correlation between Genpact and Driven is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Driven Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driven Brands Holdings 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 Limited are associated (or correlated) with Driven Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driven Brands Holdings has no effect on the direction of Genpact i.e., Genpact and Driven Brands go up and down completely randomly.

Pair Corralation between Genpact and Driven Brands

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 1.21 times more return on investment than Driven Brands. However, Genpact is 1.21 times more volatile than Driven Brands Holdings. It trades about 0.21 of its potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.0 per unit of risk. If you would invest  4,426  in Genpact Limited on November 19, 2024 and sell it today you would earn a total of  1,079  from holding Genpact Limited or generate 24.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Genpact Limited  vs.  Driven Brands Holdings

Genpact Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Genpact reported solid returns over the last few months and may actually be approaching a breakup point.

Driven Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Driven Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Driven Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Genpact and Driven Brands

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

The idea behind Genpact Limited and Driven Brands Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.