Correlation Between Red Violet and Genpact

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

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

Diversification Opportunities for Red Violet and Genpact

0.86

Correlation Coefficient

Red Violet  Genpact

Very poor diversification

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

Pair Corralation between Red Violet and Genpact

Given the investment horizon of 90 days Red Violet is expected to generate 1.7 times more return on investment than Genpact. However, Red Violet is 1.7 times more volatile than Genpact Limited. It trades about 0.05 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.0 per unit of risk. If you would invest  2,290  in Red Violet on September 26, 2024 and sell it today you would earn a total of  1,464  from holding Red Violet or generate 63.93% return on investment over 90 days.

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

Red Violet  vs.  Genpact Limited

Red Violet

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Red Violet unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Red Violet and Genpact

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

The idea behind Red Violet and Genpact Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.