Correlation Between Genpact and Resources Connection

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

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

Diversification Opportunities for Genpact and Resources Connection

0.61

Correlation Coefficient

Genpact  Resources Connection

Poor diversification

The 3 months correlation between Genpact and Resources is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Resources Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resources Connection 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 Resources Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resources Connection has no effect on the direction of Genpact i.e., Genpact and Resources Connection go up and down completely randomly.

Pair Corralation between Genpact and Resources Connection

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.57 times more return on investment than Resources Connection. However, Genpact Limited is 1.74 times less risky than Resources Connection. It trades about 0.36 of its potential returns per unit of risk. Resources Connection is currently generating about 0.07 per unit of risk. If you would invest  4,314  in Genpact Limited on October 26, 2024 and sell it today you would earn a total of  303.00  from holding Genpact Limited or generate 7.02% 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.  Resources Connection

Genpact Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 15 (%) 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.

Resources Connection

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Resources Connection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Resources Connection is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Genpact and Resources Connection

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

The idea behind Genpact Limited and Resources Connection 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.