Correlation Between KAR Auction and Genpact

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

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

Diversification Opportunities for KAR Auction and Genpact

0.95

Correlation Coefficient

KAR Auction  Genpact

Almost no diversification

The 3 months correlation between KAR and Genpact is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and Genpact go up and down completely randomly.

Pair Corralation between KAR Auction and Genpact

Considering the 90-day investment horizon KAR Auction Services is expected to generate 1.16 times more return on investment than Genpact. However, KAR Auction is 1.16 times more volatile than Genpact Limited. It trades about 0.06 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.01 per unit of risk. If you would invest  1,284  in KAR Auction Services on September 14, 2024 and sell it today you would earn a total of  773.00  from holding KAR Auction Services or generate 60.2% return on investment over 90 days.

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

KAR Auction Services  vs.  Genpact Limited

KAR Auction Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, KAR Auction reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with KAR Auction and Genpact

The main advantage of trading using opposite KAR Auction and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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 KAR Auction Services 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.