Correlation Between Genpact and Waste Management

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

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

Diversification Opportunities for Genpact and Waste Management

0.5

Correlation Coefficient

Genpact  Waste Management

Very weak diversification

The 3 months correlation between Genpact and Waste is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Genpact i.e., Genpact and Waste Management go up and down completely randomly.

Pair Corralation between Genpact and Waste Management

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 1.54 times more return on investment than Waste Management. However, Genpact is 1.54 times more volatile than Waste Management. It trades about -0.15 of its potential returns per unit of risk. Waste Management is currently generating about -0.24 per unit of risk. If you would invest  4,510  in Genpact Limited on October 12, 2024 and sell it today you would lose (159.00) from holding Genpact Limited or give up 3.53% of portfolio value over 90 days.

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

Genpact Limited  vs.  Waste Management

Genpact Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 6 (%) 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 February 2025.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Genpact and Waste Management

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

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