Correlation Between Thomson Reuters and Genpact

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

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

Diversification Opportunities for Thomson Reuters and Genpact

-0.34

Correlation Coefficient

Thomson Reuters  Genpact

Very good diversification

The 3 months correlation between Thomson and Genpact is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and Thomson Reuters 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 Thomson Reuters Corp 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 Thomson Reuters i.e., Thomson Reuters and Genpact go up and down completely randomly.

Pair Corralation between Thomson Reuters and Genpact

Considering the 90-day investment horizon Thomson Reuters Corp is expected to generate 0.84 times more return on investment than Genpact. However, Thomson Reuters Corp is 1.19 times less risky than Genpact. It trades about 0.09 of its potential returns per unit of risk. Genpact Limited is currently generating about -0.39 per unit of risk. If you would invest  16,072  in Thomson Reuters Corp on September 24, 2024 and sell it today you would earn a total of  243.00  from holding Thomson Reuters Corp or generate 1.51% return on investment over 90 days.

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

Thomson Reuters Corp  vs.  Genpact Limited

Thomson Reuters Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thomson Reuters Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Thomson Reuters is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Genpact Limited

Risk-Adjusted Performance

7 of 100

Modest

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 Thomson Reuters and Genpact

The main advantage of trading using opposite Thomson Reuters and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thomson Reuters 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 Thomson Reuters Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.