Correlation Between Infosys and Kontrol Technologies

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

Diversification Opportunities for Infosys and Kontrol Technologies

0.38

Correlation Coefficient

Infosys  Kontrol Technologies

Weak diversification

The 3 months correlation between Infosys and Kontrol is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Kontrol Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontrol Technologies Corp 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 Kontrol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontrol Technologies Corp has no effect on the direction of Infosys i.e., Infosys and Kontrol Technologies go up and down completely randomly.

Pair Corralation between Infosys and Kontrol Technologies

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Kontrol Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 3.69 times less risky than Kontrol Technologies. The stock trades about -0.22 of its potential returns per unit of risk. The Kontrol Technologies Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Kontrol Technologies Corp on December 30, 2024 and sell it today you would lose (2.00) from holding Kontrol Technologies Corp or give up 15.38% of portfolio value over 90 days.

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

Infosys Ltd ADR  vs.  Kontrol Technologies Corp

Infosys Ltd ADR

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kontrol Technologies Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kontrol Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Infosys and Kontrol Technologies

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

The idea behind Infosys Ltd ADR and Kontrol Technologies Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.