Correlation Between ARB IOT and Genpact

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

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

Diversification Opportunities for ARB IOT and Genpact

0.5

Correlation Coefficient

ARB IOT  Genpact

Very weak diversification

The 3 months correlation between ARB and Genpact is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ARB IOT Group and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and ARB IOT 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 ARB IOT Group 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 ARB IOT i.e., ARB IOT and Genpact go up and down completely randomly.

Pair Corralation between ARB IOT and Genpact

Given the investment horizon of 90 days ARB IOT Group is expected to under-perform the Genpact. In addition to that, ARB IOT is 5.16 times more volatile than Genpact Limited. It trades about -0.14 of its total potential returns per unit of risk. Genpact Limited is currently generating about -0.2 per unit of volatility. If you would invest  3,261  in Genpact Limited on February 1, 2024 and sell it today you would lose (187.00) from holding Genpact Limited or give up 5.73% of portfolio value over 90 days.

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

ARB IOT Group  vs.  Genpact Limited

ARB IOT Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

Genpact Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genpact Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ARB IOT and Genpact

The main advantage of trading using opposite ARB IOT and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARB IOT 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 ARB IOT Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.