Correlation Between Infosys and Pilani Investment

Can any of the company-specific risk be diversified away by investing in both Infosys and Pilani 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 Pilani 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 Pilani Investment and, you can compare the effects of market volatilities on Infosys and Pilani 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 Pilani Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Pilani Investment.

Diversification Opportunities for Infosys and Pilani Investment

0.61

Correlation Coefficient

Infosys  Pilani Investment

Poor diversification

The 3 months correlation between Infosys and Pilani is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and Pilani Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilani Investment 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 Pilani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilani Investment has no effect on the direction of Infosys i.e., Infosys and Pilani Investment go up and down completely randomly.

Pair Corralation between Infosys and Pilani Investment

Assuming the 90 days trading horizon Infosys Limited is expected to generate 0.71 times more return on investment than Pilani Investment. However, Infosys Limited is 1.41 times less risky than Pilani Investment. It trades about -0.05 of its potential returns per unit of risk. Pilani Investment and is currently generating about -0.35 per unit of risk. If you would invest  185,695  in Infosys Limited on November 29, 2024 and sell it today you would lose (9,265) from holding Infosys Limited or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Infosys Limited  vs.  Pilani Investment and

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 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.

Pilani Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pilani Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Infosys and Pilani Investment

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

The idea behind Infosys Limited and Pilani Investment and 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.