Correlation Between Republic Services and Genpact

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

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

Diversification Opportunities for Republic Services and Genpact

0.78

Correlation Coefficient

Republic Services  Genpact

Poor diversification

The 3 months correlation between Republic and Genpact is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Republic Services and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and Republic 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 Republic Services 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 Republic Services i.e., Republic Services and Genpact go up and down completely randomly.

Pair Corralation between Republic Services and Genpact

Considering the 90-day investment horizon Republic Services is expected to generate 0.56 times more return on investment than Genpact. However, Republic Services is 1.79 times less risky than Genpact. It trades about 0.12 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.0 per unit of risk. If you would invest  12,013  in Republic Services on October 15, 2024 and sell it today you would earn a total of  8,616  from holding Republic Services or generate 71.72% return on investment over 90 days.

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

Republic Services  vs.  Genpact Limited

Republic Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Republic Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Republic Services is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Genpact Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 8 (%) 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.

Pair Trading with Republic Services and Genpact

The main advantage of trading using opposite Republic Services and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Republic Services 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 Republic Services 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.