Correlation Between Genpact and Visa
Can any of the company-specific risk be diversified away by investing in both Genpact and Visa 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 Genpact and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genpact Limited and Visa Class A, you can compare the effects of market volatilities on Genpact and Visa 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 Genpact with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genpact and Visa.
Diversification Opportunities for Genpact and Visa
Good diversification
The 3 months correlation between Genpact and Visa is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Genpact 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 Genpact Limited are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Genpact i.e., Genpact and Visa go up and down completely randomly.
Pair Corralation between Genpact and Visa
Taking into account the 90-day investment horizon Genpact Limited is expected to generate 1.73 times more return on investment than Visa. However, Genpact is 1.73 times more volatile than Visa Class A. It trades about -0.07 of its potential returns per unit of risk. Visa Class A is currently generating about -0.18 per unit of risk. If you would invest 3,220 in Genpact Limited on January 25, 2024 and sell it today you would lose (55.00) from holding Genpact Limited or give up 1.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genpact Limited vs. Visa Class A
Performance |
| Timeline |
| Genpact Limited |
| Visa Class A |
Genpact and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genpact and Visa
The main advantage of trading using opposite Genpact and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.The idea behind Genpact Limited and Visa Class A 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.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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