Correlation Between Barrett Business and ExlService Holdings

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

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

Diversification Opportunities for Barrett Business and ExlService Holdings

-0.13

Correlation Coefficient

Barrett Business  ExlService Holdings

Good diversification

The 3 months correlation between Barrett and ExlService is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Barrett Business Services and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings and Barrett Business 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 Barrett Business Services 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 Barrett Business i.e., Barrett Business and ExlService Holdings go up and down completely randomly.

Pair Corralation between Barrett Business and ExlService Holdings

Given the investment horizon of 90 days Barrett Business Services is expected to generate 0.64 times more return on investment than ExlService Holdings. However, Barrett Business Services is 1.57 times less risky than ExlService Holdings. It trades about 0.05 of its potential returns per unit of risk. ExlService Holdings is currently generating about -0.11 per unit of risk. If you would invest  11,991  in Barrett Business Services on February 2, 2024 and sell it today you would earn a total of  252.00  from holding Barrett Business Services or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Barrett Business Services  vs.  ExlService Holdings

Barrett Business Services

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barrett Business Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Barrett Business may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ExlService Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ExlService Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, ExlService Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Barrett Business and ExlService Holdings

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

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.