Correlation Between Infosys and Formula Systems
Can any of the company-specific risk be diversified away by investing in both Infosys and Formula Systems 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 Infosys and Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Infosys Ltd ADR and Formula Systems 1985, you can compare the effects of market volatilities on Infosys and Formula Systems 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 Infosys with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Formula Systems.
Diversification Opportunities for Infosys and Formula Systems
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Infosys and Formula is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Infosys 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 Infosys Ltd ADR are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Infosys i.e., Infosys and Formula Systems go up and down completely randomly.
Pair Corralation between Infosys and Formula Systems
Given the investment horizon of 90 days Infosys is expected to generate 1.38 times less return on investment than Formula Systems. But when comparing it to its historical volatility, Infosys Ltd ADR is 1.74 times less risky than Formula Systems. It trades about 0.09 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,831 in Formula Systems 1985 on August 24, 2024 and sell it today you would earn a total of 2,442 from holding Formula Systems 1985 or generate 41.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Infosys Ltd ADR vs. Formula Systems 1985
Performance |
| Timeline |
| Infosys Ltd ADR |
| Formula Systems 1985 |
Infosys and Formula Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infosys and Formula Systems
The main advantage of trading using opposite Infosys and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, Formula Systems 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 Formula Systems will offset losses from the drop in Formula Systems' long position.| Infosys vs. Concentrix | Infosys vs. Accenture plc | Infosys vs. International Business Machines | Infosys vs. Cognizant Technology Solutions |
| Formula Systems vs. Concentrix | Formula Systems vs. Accenture plc | Formula Systems vs. International Business Machines | Formula Systems vs. Cognizant Technology Solutions |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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