Correlation Between Genpact and Wipro Limited

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

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

Diversification Opportunities for Genpact and Wipro Limited

0.83

Correlation Coefficient

Genpact  Wipro Limited

Very poor diversification

The 3 months correlation between Genpact and Wipro is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Wipro Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited ADR 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 Wipro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited ADR has no effect on the direction of Genpact i.e., Genpact and Wipro Limited go up and down completely randomly.

Pair Corralation between Genpact and Wipro Limited

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.97 times more return on investment than Wipro Limited. However, Genpact Limited is 1.03 times less risky than Wipro Limited. It trades about 0.18 of its potential returns per unit of risk. Wipro Limited ADR is currently generating about 0.1 per unit of risk. If you would invest  3,859  in Genpact Limited on September 1, 2024 and sell it today you would earn a total of  757.00  from holding Genpact Limited or generate 19.62% 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.  Wipro Limited ADR

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.

Wipro Limited ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Wipro Limited may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Genpact and Wipro Limited

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

The idea behind Genpact Limited and Wipro Limited ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.