Correlation Between Block and Genpact
Can any of the company-specific risk be diversified away by investing in both Block 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 Block and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Genpact Limited, you can compare the effects of market volatilities on Block 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 Block with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Genpact.
Diversification Opportunities for Block and Genpact
Very poor diversification
The 3 months correlation between Block and Genpact is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and Block 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 Block Inc 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 Block i.e., Block and Genpact go up and down completely randomly.
Pair Corralation between Block and Genpact
Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.87 times more return on investment than Genpact. However, Block is 1.87 times more volatile than Genpact Limited. It trades about 0.04 of its potential returns per unit of risk. Genpact Limited is currently generating about 0.01 per unit of risk. If you would invest 6,314 in Block Inc on August 26, 2024 and sell it today you would earn a total of 2,912 from holding Block Inc or generate 46.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. Genpact Limited
Performance |
| Timeline |
| Block Inc |
| Genpact Limited |
Block and Genpact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and Genpact
The main advantage of trading using opposite Block and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block 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 Block Inc 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.| Genpact vs. Oneconnect Financial Technology | Genpact vs. Global Business Travel | Genpact vs. Alight Inc | Genpact vs. CS Disco LLC |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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