Correlation Between S A P and Genpact
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE ADR and Genpact Limited, you can compare the effects of market volatilities on S A P 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 S A P with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Genpact.
Diversification Opportunities for S A P and Genpact
Very good diversification
The 3 months correlation between SAP and Genpact is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and S A P 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 SAP SE ADR 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 S A P i.e., S A P and Genpact go up and down completely randomly.
Pair Corralation between S A P and Genpact
Considering the 90-day investment horizon SAP SE ADR is expected to generate 1.04 times more return on investment than Genpact. However, S A P is 1.04 times more volatile than Genpact Limited. It trades about 0.09 of its potential returns per unit of risk. Genpact Limited is currently generating about -0.14 per unit of risk. If you would invest 17,368 in SAP SE ADR on January 26, 2024 and sell it today you would earn a total of 1,439 from holding SAP SE ADR or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Genpact Limited
Performance |
| Timeline |
| SAP SE ADR |
| Genpact Limited |
S A P and Genpact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Genpact
The main advantage of trading using opposite S A P and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 SAP SE ADR 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. ASGN Inc | Genpact vs. Formula Systems 1985 | Genpact vs. FiscalNote Holdings | Genpact vs. International Business Machines |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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