Correlation Between Genpact and ESGL Holdings

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

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

Diversification Opportunities for Genpact and ESGL Holdings

0.75

Correlation Coefficient

Genpact  ESGL Holdings

Poor diversification

The 3 months correlation between Genpact and ESGL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Genpact i.e., Genpact and ESGL Holdings go up and down completely randomly.

Pair Corralation between Genpact and ESGL Holdings

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.24 times more return on investment than ESGL Holdings. However, Genpact Limited is 4.24 times less risky than ESGL Holdings. It trades about -0.45 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about -0.23 per unit of risk. If you would invest  4,603  in Genpact Limited on September 23, 2024 and sell it today you would lose (384.00) from holding Genpact Limited or give up 8.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.67%
Values	Daily Returns

Genpact Limited  vs.  ESGL Holdings Limited

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 uncertain technical and fundamental indicators, Genpact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Genpact and ESGL Holdings

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

The idea behind Genpact Limited and ESGL Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.