Correlation Between Infosys and XTM

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

Diversification Opportunities for Infosys and XTM

0.63

Correlation Coefficient

Infosys  XTM

Poor diversification

The 3 months correlation between Infosys and XTM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and XTM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTM Inc 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 XTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTM Inc has no effect on the direction of Infosys i.e., Infosys and XTM go up and down completely randomly.

Pair Corralation between Infosys and XTM

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the XTM. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 7.59 times less risky than XTM. The stock trades about -0.21 of its potential returns per unit of risk. The XTM Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.05  in XTM Inc on December 27, 2024 and sell it today you would lose (0.93) from holding XTM Inc or give up 22.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Infosys Ltd ADR  vs.  XTM Inc

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.

XTM Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days XTM Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady forward indicators, XTM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Infosys and XTM

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

The idea behind Infosys Ltd ADR and XTM Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.