Correlation Between Infosys and Q2 Holdings

Can any of the company-specific risk be diversified away by investing in both Infosys and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings, you can compare the effects of market volatilities on Infosys and Q2 Holdings 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 Q2 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Q2 Holdings.

Diversification Opportunities for Infosys and Q2 Holdings

-0.29

Correlation Coefficient

Infosys  Q2 Holdings

Very good diversification

The 3 months correlation between Infosys and QTWO is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Q2 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q2 Holdings 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 Q2 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q2 Holdings has no effect on the direction of Infosys i.e., Infosys and Q2 Holdings go up and down completely randomly.

Pair Corralation between Infosys and Q2 Holdings

Given the investment horizon of 90 days Infosys is expected to generate 4.0 times less return on investment than Q2 Holdings. But when comparing it to its historical volatility, Infosys Ltd ADR is 2.27 times less risky than Q2 Holdings. It trades about 0.18 of its potential returns per unit of risk. Q2 Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  8,466  in Q2 Holdings on September 1, 2024 and sell it today you would earn a total of  2,008  from holding Q2 Holdings or generate 23.72% 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.  Q2 Holdings

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Q2 Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Q2 Holdings

The main advantage of trading using opposite Infosys and Q2 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, Q2 Holdings 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 Q2 Holdings will offset losses from the drop in Q2 Holdings' long position.

The idea behind Infosys Ltd ADR and Q2 Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.