Correlation Between CACI International and Wipro Limited

Can any of the company-specific risk be diversified away by investing in both CACI International 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 CACI International and Wipro Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CACI International and Wipro Limited ADR, you can compare the effects of market volatilities on CACI International 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 CACI International with a short position of Wipro Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of CACI International and Wipro Limited.

Diversification Opportunities for CACI International and Wipro Limited

-0.36

Correlation Coefficient

CACI International  Wipro Limited

Very good diversification

The 3 months correlation between CACI and Wipro is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CACI International 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 CACI International 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 CACI International 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 CACI International i.e., CACI International and Wipro Limited go up and down completely randomly.

Pair Corralation between CACI International and Wipro Limited

Given the investment horizon of 90 days CACI International is expected to under-perform the Wipro Limited. In addition to that, CACI International is 2.13 times more volatile than Wipro Limited ADR. It trades about -0.42 of its total potential returns per unit of risk. Wipro Limited ADR is currently generating about 0.16 per unit of volatility. If you would invest  346.00  in Wipro Limited ADR on September 13, 2024 and sell it today you would earn a total of  16.00  from holding Wipro Limited ADR or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CACI International  vs.  Wipro Limited ADR

CACI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CACI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Wipro Limited ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Wipro Limited may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CACI International and Wipro Limited

The main advantage of trading using opposite CACI International and Wipro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CACI International 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.

The idea behind CACI International and Wipro Limited ADR 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.