Correlation Between Gartner and ExlService Holdings

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

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

Diversification Opportunities for Gartner and ExlService Holdings

0.8

Correlation Coefficient

Gartner  ExlService Holdings

Very poor diversification

The 3 months correlation between Gartner and ExlService is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gartner and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and Gartner 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 Gartner 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 Gartner i.e., Gartner and ExlService Holdings go up and down completely randomly.

Pair Corralation between Gartner and ExlService Holdings

Allowing for the 90-day total investment horizon Gartner is expected to generate 2.08 times less return on investment than ExlService Holdings. But when comparing it to its historical volatility, Gartner is 1.33 times less risky than ExlService Holdings. It trades about 0.2 of its potential returns per unit of risk. ExlService Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,474  in ExlService Holdings on August 13, 2024 and sell it today you would earn a total of  1,099  from holding ExlService Holdings or generate 31.64% return on investment over 90 days.

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

Gartner  vs.  ExlService Holdings

Gartner

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gartner are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gartner unveiled solid returns over the last few months and may actually be approaching a breakup point.

ExlService Holdings

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, ExlService Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gartner and ExlService Holdings

The main advantage of trading using opposite Gartner and ExlService Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gartner 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 Gartner 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.