Correlation Between Infosys and Accenture Plc

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

By analyzing existing cross correlation between Infosys Limited and Accenture plc, you can compare the effects of market volatilities on Infosys and Accenture Plc 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 Accenture Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Accenture Plc.

Diversification Opportunities for Infosys and Accenture Plc

0.72

Correlation Coefficient

Infosys  Accenture Plc

Poor diversification

The 3 months correlation between Infosys and Accenture is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc 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 Limited are associated (or correlated) with Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of Infosys i.e., Infosys and Accenture Plc go up and down completely randomly.

Pair Corralation between Infosys and Accenture Plc

Assuming the 90 days trading horizon Infosys is expected to generate 1.28 times less return on investment than Accenture Plc. In addition to that, Infosys is 1.04 times more volatile than Accenture plc. It trades about 0.14 of its total potential returns per unit of risk. Accenture plc is currently generating about 0.18 per unit of volatility. If you would invest  185,543  in Accenture plc on September 22, 2024 and sell it today you would earn a total of  38,208  from holding Accenture plc or generate 20.59% return on investment over 90 days.

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

Infosys Limited  vs.  Accenture plc

Infosys Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Infosys sustained solid returns over the last few months and may actually be approaching a breakup point.

Accenture plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Accenture plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Accenture Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Accenture Plc

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

The idea behind Infosys Limited and Accenture plc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.