Correlation Between R S and Infosys

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

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

Diversification Opportunities for R S and Infosys

-0.19

Correlation Coefficient

R S  Infosys

Good diversification

The 3 months correlation between RSSOFTWARE and Infosys is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding R S Software and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and R S 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 R S Software 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 Limited has no effect on the direction of R S i.e., R S and Infosys go up and down completely randomly.

Pair Corralation between R S and Infosys

Assuming the 90 days trading horizon R S Software is expected to generate 2.28 times more return on investment than Infosys. However, R S is 2.28 times more volatile than Infosys Limited. It trades about 0.15 of its potential returns per unit of risk. Infosys Limited is currently generating about 0.05 per unit of risk. If you would invest  2,447  in R S Software on October 5, 2024 and sell it today you would earn a total of  19,703  from holding R S Software or generate 805.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

R S Software  vs.  Infosys Limited

R S Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days R S Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Infosys Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Infosys is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with R S and Infosys

The main advantage of trading using opposite R S and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if R S 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 R S Software and Infosys Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.