Correlation Between Pool and Infosys

Can any of the company-specific risk be diversified away by investing in both Pool and Infosys 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 Pool and Infosys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pool Corporation and Infosys Ltd ADR, you can compare the effects of market volatilities on Pool and Infosys 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 Pool with a short position of Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Infosys.

Diversification Opportunities for Pool and Infosys

-0.12

Correlation Coefficient

Pool  Infosys

Good diversification

The 3 months correlation between Pool and Infosys is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR and Pool 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 Pool Corporation are associated (or correlated) with Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Pool i.e., Pool and Infosys go up and down completely randomly.

Pair Corralation between Pool and Infosys

Given the investment horizon of 90 days Pool is expected to generate 3.76 times less return on investment than Infosys. In addition to that, Pool is 1.39 times more volatile than Infosys Ltd ADR. It trades about 0.03 of its total potential returns per unit of risk. Infosys Ltd ADR is currently generating about 0.15 per unit of volatility. If you would invest  1,666  in Infosys Ltd ADR on September 1, 2024 and sell it today you would earn a total of  541.00  from holding Infosys Ltd ADR or generate 32.47% return on investment over 90 days.

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

Pool Corp.  vs.  Infosys Ltd ADR

Pool

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pool Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Pool may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

Pair Trading with Pool and Infosys

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

The idea behind Pool Corporation and Infosys Ltd ADR 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.