Correlation Between Infosys and PVH Corp

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

Diversification Opportunities for Infosys and PVH Corp

0.42

Correlation Coefficient

Infosys  PVH Corp

Very weak diversification

The 3 months correlation between Infosys and PVH is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Infosys i.e., Infosys and PVH Corp go up and down completely randomly.

Pair Corralation between Infosys and PVH Corp

Given the investment horizon of 90 days Infosys is expected to generate 1.32 times less return on investment than PVH Corp. But when comparing it to its historical volatility, Infosys Ltd ADR is 1.67 times less risky than PVH Corp. It trades about 0.05 of its potential returns per unit of risk. PVH Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,984  in PVH Corp on September 27, 2024 and sell it today you would earn a total of  2,943  from holding PVH Corp or generate 36.86% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  PVH Corp

Infosys Ltd ADR

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

PVH Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, PVH Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Infosys and PVH Corp

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

The idea behind Infosys Ltd ADR and PVH 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.