Correlation Between Infosys and BF Investment

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

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

Diversification Opportunities for Infosys and BF Investment

0.72

Correlation Coefficient

Infosys  BF Investment

Poor diversification

The 3 months correlation between Infosys and BFINVEST is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and BF Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Investment Limited and Infosys 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 Infosys Limited are associated (or correlated) with BF Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Investment Limited has no effect on the direction of Infosys i.e., Infosys and BF Investment go up and down completely randomly.

Pair Corralation between Infosys and BF Investment

Assuming the 90 days trading horizon Infosys Limited is expected to generate 0.49 times more return on investment than BF Investment. However, Infosys Limited is 2.03 times less risky than BF Investment. It trades about -0.18 of its potential returns per unit of risk. BF Investment Limited is currently generating about -0.18 per unit of risk. If you would invest  191,700  in Infosys Limited on December 27, 2024 and sell it today you would lose (31,755) from holding Infosys Limited or give up 16.56% of portfolio value over 90 days.

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

Infosys Limited  vs.  BF Investment Limited

Infosys Limited

Risk-Adjusted Performance

Very Weak

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

BF Investment Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Infosys and BF Investment

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

The idea behind Infosys Limited and BF Investment 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.