Correlation Between Infosys and Western Digital

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

Diversification Opportunities for Infosys and Western Digital

-0.6

Correlation Coefficient

Infosys  Western Digital

Excellent diversification

The 3 months correlation between Infosys and Western is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Infosys i.e., Infosys and Western Digital go up and down completely randomly.

Pair Corralation between Infosys and Western Digital

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Western Digital. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 1.46 times less risky than Western Digital. The stock trades about -0.12 of its potential returns per unit of risk. The Western Digital is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  5,063  in Western Digital on May 17, 2025 and sell it today you would earn a total of  2,561  from holding Western Digital or generate 50.58% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  Western Digital

Infosys Ltd ADR

Risk-Adjusted Performance

Weakest

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.

Western Digital

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Western Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Western Digital

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

The idea behind Infosys Ltd ADR and Western Digital 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.