Correlation Between GM and Infosys
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Infosys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Infosys Limited, you can compare the effects of market volatilities on GM 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 GM with a short position of Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Infosys.
Diversification Opportunities for GM and Infosys
Weak diversification
The 3 months correlation between GM and Infosys is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and GM 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 General Motors 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 GM i.e., GM and Infosys go up and down completely randomly.
Pair Corralation between GM and Infosys
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Infosys. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.16 times less risky than Infosys. The stock trades about 0.0 of its potential returns per unit of risk. The Infosys Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,005 in Infosys Limited on September 24, 2024 and sell it today you would earn a total of 175.00 from holding Infosys Limited or generate 8.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
General Motors vs. Infosys Limited
Performance |
| Timeline |
| General Motors |
| Infosys Limited |
GM and Infosys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Infosys
The main advantage of trading using opposite GM and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Infosys vs. Accenture plc | Infosys vs. International Business Machines | Infosys vs. Cognizant Technology Solutions | Infosys vs. AMADEUS IT GRP |
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 Stocks Directory module to find actively traded stocks across global markets.
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