Correlation Between Genpact and NCR Corp

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

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

Diversification Opportunities for Genpact and NCR Corp

0.6

Correlation Coefficient

Genpact  NCR Corp

Poor diversification

The 3 months correlation between Genpact and NCR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and NCR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR 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 NCR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR Corp has no effect on the direction of Genpact i.e., Genpact and NCR Corp go up and down completely randomly.

Pair Corralation between Genpact and NCR Corp

Taking into account the 90-day investment horizon Genpact is expected to generate 3.29 times less return on investment than NCR Corp. In addition to that, Genpact is 1.27 times more volatile than NCR Corp. It trades about 0.04 of its total potential returns per unit of risk. NCR Corp is currently generating about 0.19 per unit of volatility. If you would invest  2,492  in NCR Corp on August 31, 2024 and sell it today you would earn a total of  202.00  from holding NCR Corp or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	8.56%
Values	Daily Returns

Genpact Limited  vs.  NCR Corp

Genpact Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 14 (%) 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.

NCR Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, NCR Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Genpact and NCR Corp

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

The idea behind Genpact Limited and NCR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.