Correlation Between Infosys and WNS Holdings

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Can any of the company-specific risk be diversified away by investing in both Infosys and WNS Holdings 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 WNS Holdings 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 WNS Holdings, you can compare the effects of market volatilities on Infosys and WNS Holdings 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 WNS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and WNS Holdings.

Diversification Opportunities for Infosys and WNS Holdings

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Infosys and WNS is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and WNS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WNS Holdings 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 WNS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WNS Holdings has no effect on the direction of Infosys i.e., Infosys and WNS Holdings go up and down completely randomly.

Pair Corralation between Infosys and WNS Holdings

Given the investment horizon of 90 days Infosys is expected to generate 13.58 times less return on investment than WNS Holdings. But when comparing it to its historical volatility, Infosys Ltd ADR is 5.93 times less risky than WNS Holdings. It trades about 0.1 of its potential returns per unit of risk. WNS Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,658  in WNS Holdings on November 18, 2024 and sell it today you would earn a total of  1,182  from holding WNS Holdings or generate 25.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Infosys Ltd ADR  vs.  WNS Holdings

 Performance 
       Timeline  
Infosys Ltd ADR 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
WNS Holdings 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in WNS Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, WNS Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Infosys and WNS Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Infosys and WNS Holdings

The main advantage of trading using opposite Infosys and WNS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, WNS Holdings 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 WNS Holdings will offset losses from the drop in WNS Holdings' long position.
The idea behind Infosys Ltd ADR and WNS Holdings 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.
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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