Correlation Between Information Services and Wipro Limited

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

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

Diversification Opportunities for Information Services and Wipro Limited

0.76

Correlation Coefficient

Information Services  Wipro Limited

Poor diversification

The 3 months correlation between Information and Wipro is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group 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 Information Services 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 Information Services Group 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 Information Services i.e., Information Services and Wipro Limited go up and down completely randomly.

Pair Corralation between Information Services and Wipro Limited

Considering the 90-day investment horizon Information Services Group is expected to under-perform the Wipro Limited. But the stock apears to be less risky and, when comparing its historical volatility, Information Services Group is 1.59 times less risky than Wipro Limited. The stock trades about -0.01 of its potential returns per unit of risk. The Wipro Limited ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  497.00  in Wipro Limited ADR on September 12, 2024 and sell it today you would lose (136.00) from holding Wipro Limited ADR or give up 27.36% of portfolio value over 90 days.

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

Information Services Group  vs.  Wipro Limited ADR

Information Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Wipro Limited ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wipro Limited ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Information Services and Wipro Limited

The main advantage of trading using opposite Information Services and Wipro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.