Correlation Between Science Applications and ExlService Holdings

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

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

Diversification Opportunities for Science Applications and ExlService Holdings

-0.11

Correlation Coefficient

Science Applications  ExlService Holdings

Good diversification

The 3 months correlation between Science and ExlService is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and ExlService Holdings go up and down completely randomly.

Pair Corralation between Science Applications and ExlService Holdings

Given the investment horizon of 90 days Science Applications International is expected to under-perform the ExlService Holdings. In addition to that, Science Applications is 1.57 times more volatile than ExlService Holdings. It trades about -0.02 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 Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Science Applications Internati  vs.  ExlService Holdings

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Science Applications is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Science Applications and ExlService Holdings

The main advantage of trading using opposite Science Applications and ExlService Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications 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 Science Applications International 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.