Correlation Between Infosys and Iteris

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

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

Diversification Opportunities for Infosys and Iteris

0.83

Correlation Coefficient

Infosys  Iteris

Very poor diversification

The 3 months correlation between Infosys and Iteris is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Iteris Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iteris Inc 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 Ltd ADR are associated (or correlated) with Iteris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iteris Inc has no effect on the direction of Infosys i.e., Infosys and Iteris go up and down completely randomly.

Pair Corralation between Infosys and Iteris

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Iteris. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 1.54 times less risky than Iteris. The stock trades about -0.19 of its potential returns per unit of risk. The Iteris Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  493.00  in Iteris Inc on February 19, 2024 and sell it today you would lose (30.00) from holding Iteris Inc or give up 6.09% of portfolio value over 90 days.

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

Infosys Ltd ADR  vs.  Iteris Inc

Infosys Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Iteris Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Iteris is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Infosys and Iteris

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

The idea behind Infosys Ltd ADR and Iteris Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.