Correlation Between Infosys and Gap,

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

Diversification Opportunities for Infosys and Gap,

0.07

Correlation Coefficient

Infosys  Gap,

Significant diversification

The 3 months correlation between Infosys and Gap, is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Infosys i.e., Infosys and Gap, go up and down completely randomly.

Pair Corralation between Infosys and Gap,

Given the investment horizon of 90 days Infosys is expected to generate 3.34 times less return on investment than Gap,. But when comparing it to its historical volatility, Infosys Ltd ADR is 2.33 times less risky than Gap,. It trades about 0.04 of its potential returns per unit of risk. The Gap, is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,276  in The Gap, on September 3, 2024 and sell it today you would earn a total of  1,149  from holding The Gap, or generate 90.05% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  The Gap,

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.

Gap,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Infosys and Gap,

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

The idea behind Infosys Ltd ADR and The Gap, 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.