Correlation Between SEB SA and Infosys

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

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

Diversification Opportunities for SEB SA and Infosys

-0.04

Correlation Coefficient

SEB SA  Infosys

Good diversification

The 3 months correlation between SEB and Infosys is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SEB SA 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 SEB SA 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 SEB SA 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 SEB SA i.e., SEB SA and Infosys go up and down completely randomly.

Pair Corralation between SEB SA and Infosys

Assuming the 90 days horizon SEB SA is expected to generate 1.31 times more return on investment than Infosys. However, SEB SA is 1.31 times more volatile than Infosys Ltd ADR. It trades about 0.04 of its potential returns per unit of risk. Infosys Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  947.00  in SEB SA on October 9, 2024 and sell it today you would earn a total of  255.00  from holding SEB SA or generate 26.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.76%
Values	Daily Returns

SEB SA  vs.  Infosys Ltd ADR

SEB SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEB SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SEB SA showed solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SEB SA and Infosys

The main advantage of trading using opposite SEB SA and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEB SA 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 SEB SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.