Correlation Between Infosys and Gartner

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

Diversification Opportunities for Infosys and Gartner

-0.23

Correlation Coefficient

Infosys  Gartner

Very good diversification

The 3 months correlation between Infosys and Gartner is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Gartner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gartner 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 Gartner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gartner has no effect on the direction of Infosys i.e., Infosys and Gartner go up and down completely randomly.

Pair Corralation between Infosys and Gartner

Given the investment horizon of 90 days Infosys is expected to generate 13.3 times less return on investment than Gartner. In addition to that, Infosys is 1.13 times more volatile than Gartner. It trades about 0.01 of its total potential returns per unit of risk. Gartner is currently generating about 0.11 per unit of volatility. If you would invest  48,183  in Gartner on August 31, 2024 and sell it today you would earn a total of  3,740  from holding Gartner or generate 7.76% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  Gartner

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.

Gartner

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gartner are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gartner may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Infosys and Gartner

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

The idea behind Infosys Ltd ADR and Gartner 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.