Correlation Between Genpact and First Advantage

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

By analyzing existing cross correlation between Genpact Limited and First Advantage Corp, you can compare the effects of market volatilities on Genpact and First Advantage 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 First Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genpact and First Advantage.

Diversification Opportunities for Genpact and First Advantage

-0.08

Correlation Coefficient

Genpact  First Advantage

Good diversification

The 3 months correlation between Genpact and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and First Advantage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Advantage Corp 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 First Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Advantage Corp has no effect on the direction of Genpact i.e., Genpact and First Advantage go up and down completely randomly.

Pair Corralation between Genpact and First Advantage

Taking into account the 90-day investment horizon Genpact is expected to generate 31.2 times less return on investment than First Advantage. But when comparing it to its historical volatility, Genpact Limited is 2.04 times less risky than First Advantage. It trades about 0.02 of its potential returns per unit of risk. First Advantage Corp is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,732  in First Advantage Corp on September 17, 2024 and sell it today you would earn a total of  202.00  from holding First Advantage Corp or generate 11.66% return on investment over 90 days.

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

Genpact Limited  vs.  First Advantage Corp

Genpact Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Genpact reported solid returns over the last few months and may actually be approaching a breakup point.

First Advantage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Advantage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genpact and First Advantage

The main advantage of trading using opposite Genpact and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, First Advantage 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 First Advantage will offset losses from the drop in First Advantage's long position.

The idea behind Genpact Limited and First Advantage Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.