Correlation Between Genpact and AZZ Incorporated
Can any of the company-specific risk be diversified away by investing in both Genpact and AZZ Incorporated 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 AZZ Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genpact Limited and AZZ Incorporated, you can compare the effects of market volatilities on Genpact and AZZ Incorporated 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 AZZ Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genpact and AZZ Incorporated.
Diversification Opportunities for Genpact and AZZ Incorporated
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Genpact and AZZ is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated 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 AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Genpact i.e., Genpact and AZZ Incorporated go up and down completely randomly.
Pair Corralation between Genpact and AZZ Incorporated
Taking into account the 90-day investment horizon Genpact is expected to generate 1.19 times less return on investment than AZZ Incorporated. But when comparing it to its historical volatility, Genpact Limited is 2.17 times less risky than AZZ Incorporated. It trades about 0.64 of its potential returns per unit of risk. AZZ Incorporated is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 8,295 in AZZ Incorporated on November 9, 2024 and sell it today you would earn a total of 1,260 from holding AZZ Incorporated or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Genpact Limited vs. AZZ Incorporated
Performance |
| Timeline |
| Genpact Limited |
| AZZ Incorporated |
Genpact and AZZ Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genpact and AZZ Incorporated
The main advantage of trading using opposite Genpact and AZZ Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, AZZ Incorporated 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 AZZ Incorporated will offset losses from the drop in AZZ Incorporated's long position.| Genpact vs. WNS Holdings | Genpact vs. ASGN Inc | Genpact vs. CACI International | Genpact vs. ExlService Holdings |
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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.
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