Correlation Between Infosys and Magna International
Can any of the company-specific risk be diversified away by investing in both Infosys and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on Infosys and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Magna International.
Diversification Opportunities for Infosys and Magna International
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Infosys and Magna is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Infosys i.e., Infosys and Magna International go up and down completely randomly.
Pair Corralation between Infosys and Magna International
Given the investment horizon of 90 days Infosys is expected to generate 1.81 times less return on investment than Magna International. But when comparing it to its historical volatility, Infosys Ltd ADR is 1.57 times less risky than Magna International. It trades about 0.14 of its potential returns per unit of risk. Magna International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,166 in Magna International on August 25, 2024 and sell it today you would earn a total of 342.00 from holding Magna International or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Infosys Ltd ADR vs. Magna International
Performance |
| Timeline |
| Infosys Ltd ADR |
| Magna International |
Infosys and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infosys and Magna International
The main advantage of trading using opposite Infosys and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Infosys vs. Cognizant Technology Solutions | Infosys vs. WNS Holdings | Infosys vs. CLARIVATE PLC | Infosys vs. Gartner |
| Magna International vs. Fox Factory Holding | Magna International vs. LKQ Corporation | Magna International vs. Commercial Vehicle Group | Magna International vs. Gentex |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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