Correlation Between Infosys and Wipro Limited
Can any of the company-specific risk be diversified away by investing in both Infosys and Wipro Limited 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 Wipro Limited 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 Wipro Limited ADR, you can compare the effects of market volatilities on Infosys and Wipro Limited 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 Wipro Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Wipro Limited.
Diversification Opportunities for Infosys and Wipro Limited
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Infosys and Wipro is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Wipro Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited ADR 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 Wipro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited ADR has no effect on the direction of Infosys i.e., Infosys and Wipro Limited go up and down completely randomly.
Pair Corralation between Infosys and Wipro Limited
Given the investment horizon of 90 days Infosys is expected to generate 1.03 times less return on investment than Wipro Limited. But when comparing it to its historical volatility, Infosys Ltd ADR is 1.16 times less risky than Wipro Limited. It trades about 0.16 of its potential returns per unit of risk. Wipro Limited ADR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 675.00 in Wipro Limited ADR on August 28, 2024 and sell it today you would earn a total of 32.00 from holding Wipro Limited ADR or generate 4.74% 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. Wipro Limited ADR
Performance |
| Timeline |
| Infosys Ltd ADR |
| Wipro Limited ADR |
Infosys and Wipro Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infosys and Wipro Limited
The main advantage of trading using opposite Infosys and Wipro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, Wipro Limited 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 Wipro Limited will offset losses from the drop in Wipro Limited's long position.| Infosys vs. Data Storage Corp | Infosys vs. Usio Inc | Infosys vs. ARB IOT Group | Infosys vs. FiscalNote Holdings |
| Wipro Limited vs. Cognizant Technology Solutions | Wipro Limited vs. Accenture plc | Wipro Limited vs. Gartner | Wipro Limited vs. Infosys Ltd ADR |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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