Correlation Between Infosys and Bright Scholar

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

By analyzing existing cross correlation between Infosys Ltd ADR and Bright Scholar Education, you can compare the effects of market volatilities on Infosys and Bright Scholar 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 Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Bright Scholar.

Diversification Opportunities for Infosys and Bright Scholar

-0.18

Correlation Coefficient

Infosys  Bright Scholar

Good diversification

The 3 months correlation between Infosys and Bright is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Bright Scholar Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Scholar Education 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 Ltd ADR are associated (or correlated) with Bright Scholar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Scholar Education has no effect on the direction of Infosys i.e., Infosys and Bright Scholar go up and down completely randomly.

Pair Corralation between Infosys and Bright Scholar

Given the investment horizon of 90 days Infosys Ltd ADR is expected to generate 0.22 times more return on investment than Bright Scholar. However, Infosys Ltd ADR is 4.57 times less risky than Bright Scholar. It trades about -0.09 of its potential returns per unit of risk. Bright Scholar Education is currently generating about -0.07 per unit of risk. If you would invest  2,335  in Infosys Ltd ADR on October 15, 2024 and sell it today you would lose (65.00) from holding Infosys Ltd ADR or give up 2.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Infosys Ltd ADR  vs.  Bright Scholar Education

Infosys Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Infosys and Bright Scholar

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

The idea behind Infosys Ltd ADR and Bright Scholar Education 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.