Correlation Between Guangdong Investment and Infosys
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and Infosys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Infosys Limited, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Infosys.
Diversification Opportunities for Guangdong Investment and Infosys
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and Infosys is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment i.e., Guangdong Investment and Infosys go up and down completely randomly.
Pair Corralation between Guangdong Investment and Infosys
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Infosys. In addition to that, Guangdong Investment is 1.26 times more volatile than Infosys Limited. It trades about -0.12 of its total potential returns per unit of risk. Infosys Limited is currently generating about -0.04 per unit of volatility. If you would invest 2,130 in Infosys Limited on October 28, 2024 and sell it today you would lose (70.00) from holding Infosys Limited or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Infosys Limited
Performance |
| Timeline |
| Guangdong Investment |
| Infosys Limited |
Guangdong Investment and Infosys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Infosys
The main advantage of trading using opposite Guangdong Investment and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. American Water Works | Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Gelsenwasser AG | Guangdong Investment vs. American States Water |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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