Correlation Between Deluxe and ExlService Holdings

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

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

Diversification Opportunities for Deluxe and ExlService Holdings

0.81

Correlation Coefficient

Deluxe  ExlService Holdings

Very poor diversification

The 3 months correlation between Deluxe and ExlService is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and ExlService Holdings go up and down completely randomly.

Pair Corralation between Deluxe and ExlService Holdings

Considering the 90-day investment horizon Deluxe is expected to generate 1.64 times less return on investment than ExlService Holdings. In addition to that, Deluxe is 1.61 times more volatile than ExlService Holdings. It trades about 0.1 of its total potential returns per unit of risk. ExlService Holdings is currently generating about 0.27 per unit of volatility. If you would invest  3,654  in ExlService Holdings on August 30, 2024 and sell it today you would earn a total of  1,005  from holding ExlService Holdings or generate 27.5% return on investment over 90 days.

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

Deluxe  vs.  ExlService Holdings

Deluxe

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

ExlService Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 21 (%) 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 Deluxe and ExlService Holdings

The main advantage of trading using opposite Deluxe and ExlService Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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 Deluxe 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.