Correlation Between Information Services and ExlService Holdings

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

By analyzing existing cross correlation between Information Services Group and ExlService Holdings, you can compare the effects of market volatilities on Information Services and ExlService Holdings 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 Information Services with a short position of ExlService Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and ExlService Holdings.

Diversification Opportunities for Information Services and ExlService Holdings

0.6

Correlation Coefficient

Information Services  ExlService Holdings

Poor diversification

The 3 months correlation between Information and ExlService is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and Information Services 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 Information Services Group are associated (or correlated) with ExlService Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ExlService Holdings has no effect on the direction of Information Services i.e., Information Services and ExlService Holdings go up and down completely randomly.

Pair Corralation between Information Services and ExlService Holdings

Considering the 90-day investment horizon Information Services is expected to generate 1.67 times less return on investment than ExlService Holdings. In addition to that, Information Services is 1.31 times more volatile than ExlService Holdings. It trades about 0.13 of its total potential returns per unit of risk. ExlService Holdings is currently generating about 0.28 per unit of volatility. If you would invest  3,592  in ExlService Holdings on September 3, 2024 and sell it today you would earn a total of  1,044  from holding ExlService Holdings or generate 29.06% return on investment over 90 days.

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

Information Services Group  vs.  ExlService Holdings

Information Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ExlService Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, ExlService Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Services and ExlService Holdings

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

The idea behind Information Services Group and ExlService Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.