Correlation Between Infosys and Analog Devices

Can any of the company-specific risk be diversified away by investing in both Infosys and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on Infosys and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Analog Devices.

Diversification Opportunities for Infosys and Analog Devices

0.68

Correlation Coefficient

Infosys  Analog Devices

Poor diversification

The 3 months correlation between Infosys and Analog is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Infosys i.e., Infosys and Analog Devices go up and down completely randomly.

Pair Corralation between Infosys and Analog Devices

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 1.11 times less risky than Analog Devices. The stock trades about -0.06 of its potential returns per unit of risk. The Analog Devices is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19,682  in Analog Devices on May 4, 2025 and sell it today you would earn a total of  2,489  from holding Analog Devices or generate 12.65% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  Analog Devices

Infosys Ltd ADR

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Analog Devices

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Analog Devices

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

The idea behind Infosys Ltd ADR and Analog Devices 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.