Correlation Between Western Asset and Infosys

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

By analyzing existing cross correlation between Western Asset Investment and Infosys Ltd ADR, you can compare the effects of market volatilities on Western Asset and Infosys 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 Western Asset with a short position of Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Infosys.

Diversification Opportunities for Western Asset and Infosys

0.12

Correlation Coefficient

Western Asset  Infosys

Average diversification

The 3 months correlation between Western and Infosys is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR and Western Asset 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 Western Asset Investment are associated (or correlated) with Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Western Asset i.e., Western Asset and Infosys go up and down completely randomly.

Pair Corralation between Western Asset and Infosys

Considering the 90-day investment horizon Western Asset Investment is expected to under-perform the Infosys. But the stock apears to be less risky and, when comparing its historical volatility, Western Asset Investment is 3.28 times less risky than Infosys. The stock trades about -0.03 of its potential returns per unit of risk. The Infosys Ltd ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,842  in Infosys Ltd ADR on September 25, 2024 and sell it today you would earn a total of  439.00  from holding Infosys Ltd ADR or generate 23.83% return on investment over 90 days.

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

Western Asset Investment  vs.  Infosys Ltd ADR

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Infosys Ltd ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Western Asset and Infosys

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

The idea behind Western Asset Investment and Infosys Ltd 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 Stocks Directory module to find actively traded stocks across global markets.