Correlation Between Infosys and Xalles Holdings

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

Diversification Opportunities for Infosys and Xalles Holdings

-0.27

Correlation Coefficient

Infosys  Xalles Holdings

Very good diversification

The 3 months correlation between Infosys and Xalles is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Xalles Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xalles 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 Xalles Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xalles Holdings has no effect on the direction of Infosys i.e., Infosys and Xalles Holdings go up and down completely randomly.

Pair Corralation between Infosys and Xalles Holdings

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Xalles Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 12.69 times less risky than Xalles Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Xalles Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Xalles Holdings on November 28, 2024 and sell it today you would earn a total of  0.00  from holding Xalles Holdings or generate 0.0% 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.  Xalles Holdings

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 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.

Xalles Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xalles Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Xalles Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Xalles Holdings

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

The idea behind Infosys Ltd ADR and Xalles 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.