Correlation Between Genpact and Red Violet

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

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

Diversification Opportunities for Genpact and Red Violet

0.86

Correlation Coefficient

Genpact  Red Violet

Very poor diversification

The 3 months correlation between Genpact and Red is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Red Violet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Violet 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 Red Violet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Violet has no effect on the direction of Genpact i.e., Genpact and Red Violet go up and down completely randomly.

Pair Corralation between Genpact and Red Violet

Taking into account the 90-day investment horizon Genpact Limited is expected to under-perform the Red Violet. But the stock apears to be less risky and, when comparing its historical volatility, Genpact Limited is 2.72 times less risky than Red Violet. The stock trades about -0.44 of its potential returns per unit of risk. The Red Violet is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,695  in Red Violet on September 27, 2024 and sell it today you would earn a total of  59.00  from holding Red Violet or generate 1.6% 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.  Red Violet

Genpact Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Genpact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Red Violet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Violet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Genpact and Red Violet

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

The idea behind Genpact Limited and Red Violet 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .