Correlation Between Aldel Financial and Infosys

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

By analyzing existing cross correlation between Aldel Financial II and Infosys Ltd ADR, you can compare the effects of market volatilities on Aldel Financial and Infosys 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 Aldel Financial with a short position of Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Infosys.

Diversification Opportunities for Aldel Financial and Infosys

0.53

Correlation Coefficient

Aldel Financial  Infosys

Very weak diversification

The 3 months correlation between Aldel and Infosys is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Aldel Financial i.e., Aldel Financial and Infosys go up and down completely randomly.

Pair Corralation between Aldel Financial and Infosys

Assuming the 90 days horizon Aldel Financial is expected to generate 5.29 times less return on investment than Infosys. But when comparing it to its historical volatility, Aldel Financial II is 12.54 times less risky than Infosys. It trades about 0.1 of its potential returns per unit of risk. Infosys Ltd ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,271  in Infosys Ltd ADR on September 17, 2024 and sell it today you would earn a total of  69.00  from holding Infosys Ltd ADR or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.0%
Values	Daily Returns

Aldel Financial II  vs.  Infosys Ltd ADR

Aldel Financial II

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Infosys Ltd ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aldel Financial and Infosys

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

The idea behind Aldel Financial II and Infosys Ltd ADR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.