Correlation Between Infosys and Skillful Craftsman

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

Diversification Opportunities for Infosys and Skillful Craftsman

0.22

Correlation Coefficient

Infosys  Skillful Craftsman

Modest diversification

The 3 months correlation between Infosys and Skillful is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Skillful Craftsman Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skillful Craftsman 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 Skillful Craftsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skillful Craftsman has no effect on the direction of Infosys i.e., Infosys and Skillful Craftsman go up and down completely randomly.

Pair Corralation between Infosys and Skillful Craftsman

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Skillful Craftsman. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 2.26 times less risky than Skillful Craftsman. The stock trades about -0.09 of its potential returns per unit of risk. The Skillful Craftsman Education is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Skillful Craftsman Education on October 15, 2024 and sell it today you would earn a total of  16.00  from holding Skillful Craftsman Education or generate 15.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Infosys Ltd ADR  vs.  Skillful Craftsman 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.

Skillful Craftsman

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Skillful Craftsman Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Skillful Craftsman disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Skillful Craftsman

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

The idea behind Infosys Ltd ADR and Skillful Craftsman 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.