Correlation Between Genpact and Grid Dynamics

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

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

Diversification Opportunities for Genpact and Grid Dynamics

0.84

Correlation Coefficient

Genpact  Grid Dynamics

Very poor diversification

The 3 months correlation between Genpact and Grid is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Grid Dynamics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Dynamics 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 Grid Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Dynamics Holdings has no effect on the direction of Genpact i.e., Genpact and Grid Dynamics go up and down completely randomly.

Pair Corralation between Genpact and Grid Dynamics

Taking into account the 90-day investment horizon Genpact is expected to generate 1.77 times less return on investment than Grid Dynamics. But when comparing it to its historical volatility, Genpact Limited is 1.67 times less risky than Grid Dynamics. It trades about 0.18 of its potential returns per unit of risk. Grid Dynamics Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,346  in Grid Dynamics Holdings on September 2, 2024 and sell it today you would earn a total of  484.00  from holding Grid Dynamics Holdings or generate 35.96% return on investment over 90 days.

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

Genpact Limited  vs.  Grid Dynamics Holdings

Genpact Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 13 (%) 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.

Grid Dynamics Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Dynamics Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Grid Dynamics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Genpact and Grid Dynamics

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

The idea behind Genpact Limited and Grid Dynamics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.