Correlation Between Infosys and JM Financial

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

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

Diversification Opportunities for Infosys and JM Financial

0.09

Correlation Coefficient

Infosys  JM Financial

Significant diversification

The 3 months correlation between Infosys and JMFINANCIL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial 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 JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Infosys i.e., Infosys and JM Financial go up and down completely randomly.

Pair Corralation between Infosys and JM Financial

Assuming the 90 days trading horizon Infosys Limited is expected to generate 0.55 times more return on investment than JM Financial. However, Infosys Limited is 1.83 times less risky than JM Financial. It trades about 0.02 of its potential returns per unit of risk. JM Financial Limited is currently generating about -0.07 per unit of risk. If you would invest  188,528  in Infosys Limited on September 27, 2024 and sell it today you would earn a total of  2,377  from holding Infosys Limited or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Infosys Limited  vs.  JM Financial Limited

Infosys Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Infosys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

JM Financial Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Infosys and JM Financial

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

The idea behind Infosys Limited and JM Financial 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.