Correlation Between GUDANG GARAM and Infosys

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

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

Diversification Opportunities for GUDANG GARAM and Infosys

-0.34

Correlation Coefficient

GUDANG GARAM  Infosys

Very good diversification

The 3 months correlation between GUDANG and Infosys is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and GUDANG GARAM 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 GUDANG GARAM 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 Limited has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and Infosys go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Infosys

Assuming the 90 days trading horizon GUDANG GARAM is expected to generate 2.7 times less return on investment than Infosys. But when comparing it to its historical volatility, GUDANG GARAM is 1.12 times less risky than Infosys. It trades about 0.04 of its potential returns per unit of risk. Infosys Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,090  in Infosys Limited on October 5, 2024 and sell it today you would earn a total of  90.00  from holding Infosys Limited or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

GUDANG GARAM  vs.  Infosys Limited

GUDANG GARAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Infosys Limited

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Infosys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Infosys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GUDANG GARAM and Infosys

The main advantage of trading using opposite GUDANG GARAM and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GUDANG GARAM 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 GUDANG GARAM and Infosys Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.