Correlation Between CSP and ExlService Holdings

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

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

Diversification Opportunities for CSP and ExlService Holdings

0.03

Correlation Coefficient

CSP  ExlService Holdings

Significant diversification

The 3 months correlation between CSP and ExlService is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and CSP 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 CSP Inc 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 CSP i.e., CSP and ExlService Holdings go up and down completely randomly.

Pair Corralation between CSP and ExlService Holdings

Given the investment horizon of 90 days CSP Inc is expected to under-perform the ExlService Holdings. In addition to that, CSP is 3.14 times more volatile than ExlService Holdings. It trades about -0.2 of its total potential returns per unit of risk. ExlService Holdings is currently generating about -0.17 per unit of volatility. If you would invest  3,136  in ExlService Holdings on January 31, 2024 and sell it today you would lose (188.00) from holding ExlService Holdings or give up 5.99% of portfolio value over 90 days.

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

CSP Inc  vs.  ExlService Holdings

CSP Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CSP demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ExlService Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ExlService Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, ExlService Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CSP and ExlService Holdings

The main advantage of trading using opposite CSP and ExlService Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP 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 CSP Inc 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.