Correlation Between Automatic Data and Genpact
Can any of the company-specific risk be diversified away by investing in both Automatic Data 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 Automatic Data and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Genpact Limited, you can compare the effects of market volatilities on Automatic Data 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 Automatic Data with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Genpact.
Diversification Opportunities for Automatic Data and Genpact
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Automatic and Genpact is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Genpact go up and down completely randomly.
Pair Corralation between Automatic Data and Genpact
Considering the 90-day investment horizon Automatic Data Processing is expected to generate 0.85 times more return on investment than Genpact. However, Automatic Data Processing is 1.18 times less risky than Genpact. It trades about 0.04 of its potential returns per unit of risk. Genpact Limited is currently generating about -0.06 per unit of risk. If you would invest 24,507 in Automatic Data Processing on January 26, 2024 and sell it today you would earn a total of 154.00 from holding Automatic Data Processing or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Genpact Limited
Performance |
| Timeline |
| Automatic Data Processing |
| Genpact Limited |
Automatic Data and Genpact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Genpact
The main advantage of trading using opposite Automatic Data and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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 Automatic Data Processing 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.| Genpact vs. CACI International | Genpact vs. CDW Corp | Genpact vs. Jack Henry Associates | Genpact vs. Broadridge Financial Solutions |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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