Correlation Between Genpact and LiCycle Holdings

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

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

Diversification Opportunities for Genpact and LiCycle Holdings

-0.16

Correlation Coefficient

Genpact  LiCycle Holdings

Good diversification

The 3 months correlation between Genpact and LiCycle is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp 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 LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of Genpact i.e., Genpact and LiCycle Holdings go up and down completely randomly.

Pair Corralation between Genpact and LiCycle Holdings

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.18 times more return on investment than LiCycle Holdings. However, Genpact Limited is 5.61 times less risky than LiCycle Holdings. It trades about -0.55 of its potential returns per unit of risk. LiCycle Holdings Corp is currently generating about -0.44 per unit of risk. If you would invest  4,648  in Genpact Limited on September 24, 2024 and sell it today you would lose (429.00) from holding Genpact Limited or give up 9.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Genpact Limited  vs.  LiCycle Holdings Corp

Genpact Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Genpact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LiCycle Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LiCycle Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genpact and LiCycle Holdings

The main advantage of trading using opposite Genpact and LiCycle Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, LiCycle 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 LiCycle Holdings will offset losses from the drop in LiCycle Holdings' long position.

The idea behind Genpact Limited and LiCycle Holdings Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.