Correlation Between PACCAR and Genpact

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Can any of the company-specific risk be diversified away by investing in both PACCAR 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 PACCAR and Genpact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Genpact Limited, you can compare the effects of market volatilities on PACCAR 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 PACCAR with a short position of Genpact. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Genpact.

Diversification Opportunities for PACCAR and Genpact

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between PACCAR and Genpact is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Genpact Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact Limited and PACCAR 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 PACCAR 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 PACCAR i.e., PACCAR and Genpact go up and down completely randomly.

Pair Corralation between PACCAR and Genpact

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.8 times more return on investment than Genpact. However, PACCAR Inc is 1.26 times less risky than Genpact. It trades about 0.44 of its potential returns per unit of risk. Genpact Limited is currently generating about -0.16 per unit of risk. If you would invest  11,137  in PACCAR Inc on December 30, 2023 and sell it today you would earn a total of  1,252  from holding PACCAR Inc or generate 11.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PACCAR Inc  vs.  Genpact Limited

 Performance 
       Timeline  
PACCAR Inc 

Risk-Adjusted Performance

28 of 100

 
Low
 
High
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.
Genpact Limited 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Genpact Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Genpact is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PACCAR and Genpact Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PACCAR and Genpact

The main advantage of trading using opposite PACCAR and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR 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 PACCAR 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.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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