Correlation Between Sapphire Foods and Infosys

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

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

Diversification Opportunities for Sapphire Foods and Infosys

0.21

Correlation Coefficient

Sapphire Foods  Infosys

Modest diversification

The 3 months correlation between Sapphire and Infosys is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and Sapphire Foods 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 Sapphire Foods India 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 Sapphire Foods i.e., Sapphire Foods and Infosys go up and down completely randomly.

Pair Corralation between Sapphire Foods and Infosys

Assuming the 90 days trading horizon Sapphire Foods is expected to generate 1.19 times less return on investment than Infosys. In addition to that, Sapphire Foods is 1.35 times more volatile than Infosys Limited. It trades about 0.01 of its total potential returns per unit of risk. Infosys Limited is currently generating about 0.01 per unit of volatility. If you would invest  192,661  in Infosys Limited on October 8, 2024 and sell it today you would earn a total of  1,124  from holding Infosys Limited or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sapphire Foods India  vs.  Infosys Limited

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Infosys Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sapphire Foods and Infosys

The main advantage of trading using opposite Sapphire Foods and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapphire Foods 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 Sapphire Foods India 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.