Correlation Between Infosys and State Trading

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

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

Diversification Opportunities for Infosys and State Trading

0.63

Correlation Coefficient

Infosys  State Trading

Poor diversification

The 3 months correlation between Infosys and State is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Infosys i.e., Infosys and State Trading go up and down completely randomly.

Pair Corralation between Infosys and State Trading

Assuming the 90 days trading horizon Infosys is expected to generate 1.02 times less return on investment than State Trading. But when comparing it to its historical volatility, Infosys Limited is 2.01 times less risky than State Trading. It trades about 0.14 of its potential returns per unit of risk. The State Trading is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,347  in The State Trading on April 22, 2025 and sell it today you would earn a total of  1,372  from holding The State Trading or generate 11.11% 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.  The State Trading

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.

State Trading

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, State Trading demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and State Trading

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

The idea behind Infosys Limited and The State Trading 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.