Correlation Between Infosys and Indian Oil

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

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

Diversification Opportunities for Infosys and Indian Oil

0.48

Correlation Coefficient

Infosys  Indian Oil

Very weak diversification

The 3 months correlation between Infosys and Indian is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil 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 Indian Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Oil has no effect on the direction of Infosys i.e., Infosys and Indian Oil go up and down completely randomly.

Pair Corralation between Infosys and Indian Oil

Assuming the 90 days trading horizon Infosys Limited is expected to generate 1.01 times more return on investment than Indian Oil. However, Infosys is 1.01 times more volatile than Indian Oil. It trades about 0.14 of its potential returns per unit of risk. Indian Oil is currently generating about 0.09 per unit of risk. If you would invest  140,327  in Infosys Limited on April 22, 2025 and sell it today you would earn a total of  18,283  from holding Infosys Limited or generate 13.03% return on investment over 90 days.

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

Infosys Limited  vs.  Indian Oil

Infosys Limited

Risk-Adjusted Performance

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. In spite of comparatively weak basic indicators, Infosys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Indian Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Oil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Indian Oil may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Infosys and Indian Oil

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

The idea behind Infosys Limited and Indian Oil 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.