Correlation Between Tata Chemicals and Infosys

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

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

Diversification Opportunities for Tata Chemicals and Infosys

0.77

Correlation Coefficient

Tata Chemicals  Infosys

Poor diversification

The 3 months correlation between Tata and Infosys is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tata Chemicals Limited and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited and Tata Chemicals 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 Tata Chemicals Limited 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 Limited has no effect on the direction of Tata Chemicals i.e., Tata Chemicals and Infosys go up and down completely randomly.

Pair Corralation between Tata Chemicals and Infosys

Assuming the 90 days trading horizon Tata Chemicals is expected to generate 1.34 times less return on investment than Infosys. In addition to that, Tata Chemicals is 1.0 times more volatile than Infosys Limited. It trades about 0.1 of its total potential returns per unit of risk. Infosys Limited is currently generating about 0.14 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Tata Chemicals Limited  vs.  Infosys Limited

Tata Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Chemicals Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Tata Chemicals may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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.

Pair Trading with Tata Chemicals and Infosys

The main advantage of trading using opposite Tata Chemicals and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Chemicals 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 Tata Chemicals Limited and Infosys Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.