Correlation Between Wipro and Infosys

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

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

Diversification Opportunities for Wipro and Infosys

-0.31

Correlation Coefficient

Wipro  Infosys

Very good diversification

The 3 months correlation between Wipro and Infosys is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and Wipro 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 Wipro Limited 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 Wipro i.e., Wipro and Infosys go up and down completely randomly.

Pair Corralation between Wipro and Infosys

Assuming the 90 days trading horizon Wipro is expected to generate 1.56 times less return on investment than Infosys. But when comparing it to its historical volatility, Wipro Limited is 1.09 times less risky than Infosys. It trades about 0.06 of its potential returns per unit of risk. Infosys Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  180,210  in Infosys Limited on August 31, 2024 and sell it today you would earn a total of  5,575  from holding Infosys Limited or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Wipro Limited  vs.  Infosys Limited

Wipro Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wipro may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Infosys Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Wipro and Infosys

The main advantage of trading using opposite Wipro and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro 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 Wipro Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.