Correlation Between Genpact and Globant SA

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

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

Diversification Opportunities for Genpact and Globant SA

0.65

Correlation Coefficient

Genpact  Globant SA

Poor diversification

The 3 months correlation between Genpact and Globant is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Globant SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globant SA 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 Globant SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globant SA has no effect on the direction of Genpact i.e., Genpact and Globant SA go up and down completely randomly.

Pair Corralation between Genpact and Globant SA

Taking into account the 90-day investment horizon Genpact is expected to generate 1.1 times less return on investment than Globant SA. But when comparing it to its historical volatility, Genpact Limited is 1.18 times less risky than Globant SA. It trades about 0.15 of its potential returns per unit of risk. Globant SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15,406  in Globant SA on September 1, 2024 and sell it today you would earn a total of  7,370  from holding Globant SA or generate 47.84% return on investment over 90 days.

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

Genpact Limited  vs.  Globant SA

Genpact Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 14 (%) 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.

Globant SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Globant SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Globant SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Genpact and Globant SA

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

The idea behind Genpact Limited and Globant SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.