Correlation Between Genpact and Fuel Tech

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

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

Diversification Opportunities for Genpact and Fuel Tech

0.37

Correlation Coefficient

Genpact  Fuel Tech

Weak diversification

The 3 months correlation between Genpact and Fuel is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech 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 Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of Genpact i.e., Genpact and Fuel Tech go up and down completely randomly.

Pair Corralation between Genpact and Fuel Tech

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.63 times more return on investment than Fuel Tech. However, Genpact Limited is 1.59 times less risky than Fuel Tech. It trades about -0.01 of its potential returns per unit of risk. Fuel Tech is currently generating about -0.02 per unit of risk. If you would invest  4,364  in Genpact Limited on October 15, 2024 and sell it today you would lose (15.50) from holding Genpact Limited or give up 0.36% of portfolio value over 90 days.

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

Genpact Limited  vs.  Fuel Tech

Genpact Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 8 (%) 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 February 2025.

Fuel Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuel Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Genpact and Fuel Tech

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

The idea behind Genpact Limited and Fuel Tech 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.