Correlation Between Genpact and Jacobs Solutions

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

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

Diversification Opportunities for Genpact and Jacobs Solutions

0.3

Correlation Coefficient

Genpact  Jacobs Solutions

Weak diversification

The 3 months correlation between Genpact and Jacobs is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Genpact i.e., Genpact and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Genpact and Jacobs Solutions

Taking into account the 90-day investment horizon Genpact Limited is expected to under-perform the Jacobs Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Genpact Limited is 1.01 times less risky than Jacobs Solutions. The stock trades about -0.1 of its potential returns per unit of risk. The Jacobs Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13,352  in Jacobs Solutions on September 20, 2024 and sell it today you would earn a total of  114.00  from holding Jacobs Solutions or generate 0.85% return on investment over 90 days.

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

Genpact Limited  vs.  Jacobs Solutions

Genpact Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 9 (%) 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.

Jacobs Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Genpact and Jacobs Solutions

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

The idea behind Genpact Limited and Jacobs Solutions 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.