Correlation Between Bright Scholar and Infosys

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

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

Diversification Opportunities for Bright Scholar and Infosys

-0.12

Correlation Coefficient

Bright Scholar  Infosys

Good diversification

The 3 months correlation between Bright and Infosys is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education 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 Bright Scholar 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 Bright Scholar Education 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 Bright Scholar i.e., Bright Scholar and Infosys go up and down completely randomly.

Pair Corralation between Bright Scholar and Infosys

Given the investment horizon of 90 days Bright Scholar Education is expected to under-perform the Infosys. In addition to that, Bright Scholar is 4.05 times more volatile than Infosys Ltd ADR. It trades about -0.09 of its total potential returns per unit of risk. Infosys Ltd ADR is currently generating about -0.05 per unit of volatility. If you would invest  2,318  in Infosys Ltd ADR on September 27, 2024 and sell it today you would lose (46.50) from holding Infosys Ltd ADR or give up 2.01% of portfolio value over 90 days.

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

Bright Scholar Education  vs.  Infosys Ltd ADR

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Infosys Ltd ADR

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 2 (%) 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 Bright Scholar and Infosys

The main advantage of trading using opposite Bright Scholar and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Scholar 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 Bright Scholar Education 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 Transaction History module to view history of all your transactions and understand their impact on performance.