Correlation Between CRA International and Infosys

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

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

Diversification Opportunities for CRA International and Infosys

-0.01

Correlation Coefficient

CRA International  Infosys

Good diversification

The 3 months correlation between CRA and Infosys is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CRA International 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 CRA International 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 CRA International 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 CRA International i.e., CRA International and Infosys go up and down completely randomly.

Pair Corralation between CRA International and Infosys

Given the investment horizon of 90 days CRA International is expected to generate 2.52 times less return on investment than Infosys. In addition to that, CRA International is 1.52 times more volatile than Infosys Ltd ADR. It trades about 0.03 of its total potential returns per unit of risk. Infosys Ltd ADR is currently generating about 0.12 per unit of volatility. If you would invest  1,813  in Infosys Ltd ADR on September 23, 2024 and sell it today you would earn a total of  460.00  from holding Infosys Ltd ADR or generate 25.37% return on investment over 90 days.

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

CRA International  vs.  Infosys Ltd ADR

CRA International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Infosys Ltd ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 1 (%) 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 CRA International and Infosys

The main advantage of trading using opposite CRA International and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International 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 CRA International 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.